Welcome to Washington Secrets where we run you through the lessons learned from an Iran war game that looked at the economic impacts of shutting down the Strait of Hormuz, and drill into why Marco Rubio’s presidential hopes are surging (and if they are real) …
The first sign of a brewing crisis is when the United Nations slaps sanctions on Iran at the end of a month of fruitless talks to shut down Tehran’s nuclear weapons program.
Iran responds on Day 2. It withdraws from the atomic nonproliferation treaty and tests a nuclear weapon.
On Day 3, American bombs rain down on its nuclear facilities and air defenses.
By Day 5, Shia militias have launched attacks on Iran’s neighbors, and a day later, the Strait of Hormuz has been closed. A tanker is sunk by a mine and oil prices are on their way up.
These are not headlines from Operation Epic Fury in 2026. They are the starting point for a 2007 wargame run by the Heritage Foundation, which, with uncanny foresight, mapped just how a conflict would unfold and the devastating consequences for the U.S. economy.
It forecast that a million jobs would be lost in the following six months.
“We’ve been stuck in this Groundhog Day with Iran for the past 20 years,” said Bill Beach, former commissioner of Labor Statistics, who crunched the numbers for the wargame, and is experiencing a deep moment of deja vu. “It’s a cycle of rinse and repeat.”
The aim was to map how world economies would react if oil shipments through the Strait of Hormuz fell to zero.
The answer? Not good.
Economists and analysts calculated that the price of West Texas Intermediate oil would surge to $150 (compared with $65 in the absence of a crisis) and, if nothing were done, it would slash nine-tenths of a point off U.S. gross domestic product in the following quarter.
READ MORE: Iran war causing largest disruption of oil in history, International Energy Agency says
That equates to a reduction in disposable income of $531 billion (by current prices) — or more than $4,500 per household.
This is the nightmare scenario haunting Republicans as they prepare for midterm elections. Overnight, three commercial vessels were attacked in the Strait of Hormuz, and West Texas Intermediate oil is up in price by 50%.
But all is not lost, according to Beach. His numbers represent the worst-case scenario.
Each day, the assembled wargamers, senior staffers and former officials from Congress, the Pentagon, Treasury, banking, industry, and beyond, devised mitigation strategies, which Beach would then plug into the models to see what helped ease the crisis.
The best response, said Beach, was a package of measures designed to increase supplies of gas, ease tax or regulatory burdens on energy production, and provide extra help for consumers, including:
- Deploy forces to maintain freedom of navigation in the Strait of Hormuz
- Relax clean air regulations for power plants
- Release supplies from the Strategic Petroleum Reserve in line with international treaties
- Congress to pass an emergency supplemental defense appropriation of $30 billion
- Increase funding for the Low-Income Home Energy Assistance Program
When the new measures were added to the model, the price of oil dropped near its starting point, Beach said.
“We neutralized most of the unemployment, which rose about a percentage point but not as much as we thought it might,” he said.
GDP stayed roughly the same, and disposable income grew at non-crisis rates.
Some things are not the same as last time around. The economy has less room to absorb additional deficits, for example.
But have the lessons been learned? How are we doing in real life?
Mixed, is Beach’s assessment.
The International Energy Agency has announced the release of 400 million barrels of oil and the Trump administration will weigh in by releasing 172 million.
But Beach said the U.S. was nowhere near taking the rest of the recommended steps.
“I think it largely depends, in Congress’ case, the administration’s case, on whether or not this moves to being a monthlong, two-monthlong war, in which case, then you probably will see tax legislation proposed, stuff like that,” he said.
And then he added the kicker. It would have been nice if someone had run these wargames more recently than almost 20 years ago.
Marco Rubio’s 2028 hopes are surging
An interesting thing happened on the Kalshi betting market yesterday. Marco Rubio became the favorite to win the 2028 presidential election, leapfrogging Gov. Gavin Newsom (D-CA) and Vice President JD Vance. Secrets sees three factors at work.
Venezuela: The secretary of state was front and center of the operation to capture Nicolas Maduro, elevating his profile at the start of the year.
Iran: The same thing is happening now with the strikes on Iran. Rubio is making the case for action while Vance (from the anti-interventionist MAGA wing) is quiet.
Mar-a-Lago straw poll: The key factor in the bets placed, though, is an informal poll taken by Trump at his Florida club, where attendees were far more enthusiastic about Rubio than Vance.
It’s good news for Rubio, even if Vance retook first place in the market on Thursday morning. And if you want to sound smart, point out that Vance remains way ahead in polls of Republican voters. So Rubio may have the Mar-a-Lago donor class, but the base still loves Vance.
Ambassador Farage
The British government yesterday released a tranche of documents related to the appointment of Peter Mandelson as its ambassador to Washington. Key questions center on whether his links with Jeffrey Epstein were scrutinized sufficiently.
There are plenty of other interesting nuggets in the files. For instance, they highlight earlier comments he had made about how the government could use Nigel Farage, the populist Brexiteer, and his links to Donald Trump.
“You can’t ignore him, he’s an elected member of parliament. He’s a public figure,” Mandelson once said. “He’s a bridgehead, both to President Trump and to Elon Musk and others. … National interest is served in all sorts of weird and wonderful ways.”
Farage had even been floated as a possible candidate for the ambassador job (mostly by himself). And probably would have lasted longer than Mandelson’s seven months in Washington.
Lunchtime reads
Sucker — My year as a degenerate gambler: What happens when you give a reporter $10,000 to explore the nation’s obsession with sports betting? There’s no such thing as free money, is probably the answer.
Crypto cash floods Illinois Senate race as super PACs escalate attacks: The race to replace retiring Sen. Dick Durbin (D-IL) is quickly becoming one of the most expensive and negative Democratic primaries of the 2026 cycle, fueled in part by millions of dollars from cryptocurrency-backed super PACs.
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