9: Iran

Dire Strait Oil wells that end badly? ............ the Strait of Hormuz has been effectively closed since the war on Iran began, with no obvious way to get it reopened quickly. As I showed in yesterday’s primer, continued closure of the Strait is a shock to world oil supplies bigger than the oil shocks of the 1970s. ......... on Friday Trump called for UNCONDITIONAL SURRENDER, suggesting both intransigence and a tenuous grip on reality. Then the Iranians chose Khamenei’s son, reputedly a hard-liner, as the new Supreme Leader. These developments may have dashed the hopes of oil traders who still thought we might have cosplay regime change, Venezuela-style: The regime basically continues, but a new leader makes conciliatory noises and throws a bunch of money Trump’s way. That could still happen, but not for a while. ................ As the Strait remains closed, producers are shutting down, and this isn’t like turning off a tap that can be quickly restarted. There’s apparently a real nonlinearity here: a 2-week closure of the Strait has much more than twice the adverse impact on global oil supply as a 1-week closure. If this goes on for multiple weeks — and it’s easy to imagine that happening — oil prices, which retreated slightly off their highs early this morning, could go much higher. ................ the “warrior ethos” gang in the Trump administration seem to have been caught completely off-guard by the fallout from their adventure, even though the military and the intelligence community tried to warn them about the risks.

So start.

— Paramendra Kumar Bhagat (@paramendra) March 9, 2026