Steve Hanke, professor of applied economics at Johns Hopkins University and a regular contributor to Fortune, delivered a stark assessment on The David Lin Report: the United States is losing the Iran conflict and is functionally insolvent, while Washington continues to spin the numbers. His analysis provides a critical framework for understanding the macroeconomic backdrop affecting risk assets, including cryptocurrencies.
Strait of Hormuz Nearly Closed: Iran Gains Leverage
According to Hanke, the ongoing war has reduced throughput in the Strait of Hormuz for hostile nations by roughly 95%. Iran, far from being on the defensive, has mobilized over one million troops and now controls the world's most vital energy chokepoint. Iranian oil exports have actually increased since the conflict began, with tankers selling crude at higher prices and smaller discounts. The Iranian rial has appreciated 6% against the dollar, and annual inflation, though still high at 67%, has dropped from over 80%.
The West is feeling the pain. The Philippines declared a national energy emergency. New Zealand is making weekly cash payments to 150,000 families for fuel costs. Taiwan faces a helium shortage — a key input for chip manufacturing — and is now sourcing from Russia. Hanke dismisses the idea that the U.S. is insulated as a net energy exporter, noting it remains a net crude importer: “This is another joke coming out of Washington.”
US Balance Sheet Shows 'Complete Catastrophe'
Hanke, co-authoring with former U.S. Comptroller General Dave Walker in Fortune, points to the federal government's own consolidated financial statements. As of September 30, 2025, the U.S. holds roughly $6 trillion in assets against nearly $48 trillion in on-balance-sheet liabilities. Adding Social Security and Medicare — both off-balance-sheet — pushes total liabilities to approximately $136 trillion. “That means you're insolvent. It's a complete catastrophe, and the numbers are deteriorating very rapidly,” Hanke said.
Bond markets have responded accordingly. Rising 10-year Treasury yields reflect investor concern over deficit expansion. While higher yields temporarily pressure gold prices, Hanke maintains his $6,000–$7,000 per ounce target for the current cycle, arguing that the fundamental case for hard assets remains intact as fiscal unsustainability becomes more apparent.
Winners and Losers: Russia Gains, Israel's Decapitation Fails
Russia emerges as the clearest beneficiary of the conflict: it produces oil, fertilizer, and helium — three commodities whose supply from the Gulf has been disrupted — and is positioned to exchange sanctions relief for market access. Meanwhile, the Mossad's decapitation strategy targeting Iran's supreme leader has failed. Intelligence assessments predicted the regime would collapse within days of the assassination, but it didn't happen. “This goes in the failure book,” Hanke said.
Implications for Crypto Markets
Growing fiscal distress and geopolitical fragmentation strengthen the narrative for decentralized, scarce assets like Bitcoin. As sovereign creditworthiness deteriorates and currency debasement fears mount, hard assets — both gold and cryptocurrencies — may attract structural inflows. However, near-term volatility from rising yields and dollar strength could create headwinds. Crypto investors should monitor the correlation between bond market stress and digital asset prices as the macroeconomic backdrop evolves.