With the world still slugging through the second act of the Great Recession, few scenarios cause more chills to run down the spines of Washington policymakers than a potential war with Iran. Although it is difficult to envision Iran emerging victorious from such a conflict, the outcome would be all but pyrrhic for the US: oil prices (potentially reaching $200 per barrel) would grind the economy to a halt, and the only hole bigger than the ones made by the USAF’s bunker-busting bombs, would be the budget hole caused by another hot war in the Middle East, one which in the worst case scenario would be bigger, longer and bloodier than those being waged in Iraq or Afghanistan. But perhaps what scares the pants off the Obama administration is the war’s total unpredictability: it only takes one surprise attack by Israel to launch a series of events which could lead into an unmitigated disaster. Many people have wondered whether such a scenario could be “contained”; that is, leave Israel and Iran slugging it out among themselves. Certainly that would limit the diplomatic fallout, and leave the US to worry on more important domestic matters during a crucial election year.
But as I will show in this post, such a scenario appears unrealistic. Once the first bomb falls, the US will be sucked in it, just like a limited tactical nuclear strike during the Cold War would have inevitably escalated into all out exchange. My analysis will be capped by a simple game theoretical model which will make the outcome clearer for those of you who are more numerically inclined. Continue reading