Birthday Victory Lap on Oil

[Jon Freise]

Hi Everyone,

It looks like Trump gave himself a victory lap for his birthday.  This looks like a declare victory and walk away in defeat kind of deal.

It looks like Iran will retain control over the Strait.  The US blockade will end.  Iran does not need to give up its nuclear weapons.  Fighting must stop on all fronts, including Lebanon.  Which means that Hezbollah will be protected from further attack.

Iran clearly comes out stronger from this conflict than before.  And none of the stated objectives of regime change in Iran, elimination of the nuclear program, ending support for Iran's allied groups, or reduction in its drone and ballistic missile capability has been achieved.  And instead Iran now has control over all the Gulf States export of oil and can charge billions in fees.

This deal is unlikely to stick for long.  Israel and Iran see one another as an existential threat.  And they cannot allow the other side to come out winning.

There is evidence coming out that the Gulf Arab states are paying Iran billions to stop missile and drone attacks (that the US cannot block).  So already direct military power has shifted to Iran.

The metric to watch is the number of ships entering and exiting the Strait.  If that does not rise back to 100 per day, then essentially nothing has actually changed. 

Short term:

We will have to see if Iran (or Israel) will actually agree to any deal.  Right now world oil and refined product stockpiles are depleting.  That will come to a crisis in August / September.  That is when Iran will have maximum negotiating leverage.  Expect the 60 days "to finalize the agreement" to turn into 90 and then 120, etc, while prices rage out of control.

Empty tankers are going to be very reluctant to enter the Strait if there is no solid deal.

That could mean a large scale economic crisis striking around the same time as the US elections in November.  Failure to raise prices now just means a more brutal shock when the stockpiles run out.

A desperate administration that loses the midterms is likely to contest those elections.  National Guard troops are already stationed all over DC.  It will be interesting to see if newly elected congress members are seated or if they are blocked / arrested.  We could easily see the current Lawfare get pushed into violence against the opposition.

Longer term:

The ultimate Confederate victory will be achieved when most of the US population can no longer access accurate information.  The Confederate coalition has been purchasing up the media landscape for some time.  The coalition has clearly included Russia and its disinformation capability (per the US Senate investigation into the 2016 election).  But it now also includes funding from other international partners like the Gulf Arab states.

https://www.nytimes.com/2026/04/07/business/gulf-invest-paramount-warner-bros.html

This coalition does not represent the people of the US.  Even MTG has finally twigged to that.  But it now has the full might of the US economy and military under its control.  What will it do with that power?  All the international investors suggest external expansion.  (third scenario).

Nate Hagens did a long but excellent interview with Michael Every on The Great Simplification about Every's theory of the US forming up a new world order based on control of the world's oil and reserve currency.  By capturing the Western oil producers, like Venezuela, and Canada, and seizing the Middle East, the US would dominate most of the world's oil and LNG.  

However the Iran war did not go that way.  And Iran, supported by China, may end up with control of the Middle East.  That would give China substantial control over the Asian economies.

A lot of people have a strong emotional reaction when listening to Every's interview.  Remember that gaming out the future requires you to get into the mental models of people you may not agree with or like at all.  All good gamers (and actors) need to be able to play to win from all perspectives.  But it can be upsetting to contemplate if you are empathetic for those who are suffering.  Predicting the future does not always paint a future we want or like.

After Civil War 1.0 the US tried to form a multicultural democracy.  But it was defeated through political violence, https://libguides.uncw.edu/wilmington_coup_detat_1898.  If you have not read about it then I would recommend doing so.  It is pretty shocking reading.  I would expect that similar levels of violence will happen again.  But this time there will be substantial counter violence.

[Jon Freise]

Drafts of the MOU text have made it out.  It looks like the US capitulates, agrees to never attack again, and withdraws forces.  Iran gets to charge fees to cross the Strait.  The Gulf Arab states will commit $300 billion to Iran's reconstruction (essentially paying tribute above and beyond the fees to use the Strait).  And all Iran's proxies are protected.  No terms on nuclear weapons.  And nothing about Iran's drones or ballistic missiles.

Trump was clearly desperate to end the war.  He claimed victory and is going to try to escape hanging from the skid of a fleeing helicopter.  Which is probably the best outcome that the US could get given the disastrous start to this war. 

This agreement is very unlikely to hold.  It dooms Israel and I expect they will not go down without a fight.  Personally, I would plan for the Strait to stay blocked, and then enjoy the upside if it does not.  YMMV.

I so miss the competence of the Obama administration.  Sigh.  Well, I had a chance to live through some of the best times in the world.  So count my blessings.

Lawfare:

On the charges against the Minneapolis protesters:  This is more lawfare.  Where one faction attacks the other faction using the mechanisms of government.  The DOJ was founded after the Civil War to try to stop the KKK (right wing militia) from preventing the reconstruction.  Now that the Confederates have seized the Federal government, the DOJ is being used against those fighting for liberty and equality.  The blue states will be picked off one by one.  Funds withheld to cause a State fiscal crisis and then political and citizen groups will be attacked by lawfare.  At the same time, all attempts to bring justice for the crimes committed by Trump loyalists are blocked via pardons, charges being dropped, and even fiscal pressure applied to states to get state charges dropped.  This is totally normal for a nation state sliding into civil war.

Grim news.  But that makes it all the more important that you all find a moment to enjoy the start of summer.  May your plants grow green and lush!