Steve Hanke, professor of applied economics at Johns Hopkins University and a regular Fortune contributor, delivered a stark assessment on The David Lin Report: the United States is losing its war with Iran and is functionally insolvent, with its own financial statements revealing a catastrophic balance sheet.
Iran Wins by Controlling the Strait of Hormuz
Hanke argued that Iran is winning a war of attrition by controlling the Strait of Hormuz, through which roughly 95% of normal oil traffic has been halted. Iran has mobilized over one million troops and holds the world's most critical energy chokepoint. “They have Trump completely in a corner because the Western economies are suffering tremendous damage already,” Hanke said. Tehran’s leverage extends beyond military: Iranian oil exports have actually increased since hostilities began, with tankers exiting the Strait and selling at higher prices. The Iranian rial has appreciated 6% since the war started, while inflation has eased from over 80% to 67% — still severe but improving.
The economic fallout is spreading. Physical oil markets in Asia are trading well above futures, with the Philippines declaring a national energy emergency and New Zealand providing weekly cash payments to 150,000 families for fuel. Taiwan faces helium shortages, a critical input for chip manufacturing, and has turned to Russia for supply. Russia, Hanke noted, is the war's biggest beneficiary, exporting oil, fertilizer, and helium that are now bottled up in the Gulf, and stands to gain sanctions relief in exchange for market access.
Hanke dismissed the Mossad's decapitation strategy as a failure. Intelligence had predicted the Iranian regime would collapse within days of the supreme leader's assassination, but it did not. “This goes in the failure book,” he said.
He also pushed back against claims that the US is insulated from oil price shocks because it is a net energy exporter. The US remains a net crude oil importer. “Forget the fact that we’re somehow insulated from world prices in oil. This is another joke coming out of Washington,” Hanke said.
US Government Balance Sheet: $6 Trillion in Assets vs. $136 Trillion in Liabilities
In a Fortune article co-authored with former US Comptroller General Dave Walker, Hanke drew directly from the US government’s own consolidated financial statements. As of September 30, 2025, the federal government holds roughly $6 trillion in assets against nearly $48 trillion in on-balance-sheet liabilities. Adding Social Security and Medicare — both off-balance-sheet — brings total liabilities to approximately $136 trillion. “You have a little over six trillion in assets and almost 48 trillion in liabilities,” Hanke said. “That means you’re insolvent. It’s a complete catastrophe, and the numbers are deteriorating very rapidly.”
The bond market reflects this unease: rising 10-year Treasury yields signal investor concern over deficit expansion. Higher yields raise the opportunity cost of holding non-yielding gold, which Hanke says explains recent gold price weakness, but he maintains his long-term gold target of $6,000–$7,000 per ounce for the current cycle. He proposes two fixes: a congressional commission to address existing liabilities, and a constitutional amendment modeled on Switzerland’s 2001 debt brake, which caps spending growth at real GDP growth and requires a balanced budget over the business cycle.
FAQ
- Is the US government insolvent? According to its own consolidated financial statements, the federal government holds roughly $6 trillion in assets against $136 trillion in total liabilities including Social Security and Medicare.
- Is Iran winning the war against the US and Israel? Economist Steve Hanke argues Iran is winning by controlling the Strait of Hormuz, increasing oil exports, and waiting out a militarily superior but economically constrained opponent.
- How does the Iran war affect US oil prices? The US is a net crude oil importer, so global price increases driven by the Strait of Hormuz closure directly raise costs for American consumers and businesses.
- What is Steve Hanke’s gold price target? Hanke maintains a price target range of $6,000 to $7,000 per ounce for gold during the current cycle, though he expects the pace of gains to slow given rising yields and a stronger dollar.