Iran's oil war forces US allies to pick sides

Energy (1)

• Oil (WTI) prices have risen 40% since early July to $95-$100 per barrel due to renewed tensions in the Strait of Hormuz, contributing to a difficult week for TradFi markets.

BTC Markets (1)

• Bitcoin and Ether were up 0.5% this week, showing relative strength against TradFi, where the NASDAQ and S&P indices fell 2-3%, which David suggests might indicate seller exhaustion in crypto.

Adoption (1)

• River Financial data shows 18.5% of US adults own Bitcoin compared to 10.8% owning gold; however, Ryan notes the Bitcoin figure includes ETF exposure while gold's does not.

Business (2)

• BitMine (Tom Lee) plans to cap ETH accumulation at 5% of total supply (currently 4.85%) and has begun buying back 5.5 million BMNR shares at an average of $15.62, prioritizing shareholder value.
• The Venice team expanded its VVV token burn, now allocating 5% of API usage and credit purchase revenue to buy and burn tokens, raising the total daily burn to nearly $10,000, bolstering confidence in its value accrual.

Regulation (1)

• Hester Peirce warns that DeFi vaults, if managed with entrepreneurial effort, may be deemed securities, but she advocates for a nuanced regulatory framework rather than simply applying 1940s securities law.

Energy (1)

• Saagar reports oil prices are nearing $100 a barrel due to Houthi attacks blocking the Bab-el-Mandeb Strait, hindering Saudi Arabia's ability to ship millions of barrels of oil. This primarily impacts large tankers unable to use the Suez Canal.

Diplomacy (2)

• Krystal highlights a geopolitical development where a Chinese-flagged oil tanker was permitted passage through the Bab-el-Mandeb Strait by the Houthis after diplomacy with Beijing, indicating selective enforcement of blockades.
• Professor Morandi states that no one in Iran is discussing negotiations with the US, only debate exists on whether to have been more assertive earlier. He explains Iranian leaders distrusted the US on the MoU, using the initial period to export oil and import supplies for renewed conflict.

War (5)

• Krystal reports significant US military repositioning in the Middle East, including thousands of assets and 150 new medics deployed to a German medical base, signaling preparations for potential casualties and further escalation.
• Professor Morandi states Iran has previously retaliated against US/Israeli attacks on its infrastructure by striking Qatari gas facilities and Kuwait's electrical grid, establishing a deterrence strategy. He warns similar responses would destroy critical infrastructure in Gulf host nations.
• Professor Morandi dismisses General Callaghoe's suggestion to seize Kharg Island, arguing it holds no strategic value in modern warfare given Iran's long-range missile and drone capabilities. He predicts such an action would only lead to US troop casualties.
• Professor Morandi warns that an all-out war would cause a global economic depression worse than the 1930s, leading to widespread job loss, business failures, and mass migration. He emphasizes Iran is prepared with strong regional resistance forces.
• Krystal reports Secretary of War Pete Hegseth requested $1.5 trillion for the Pentagon, asserting that not funding it is the greatest national security threat, despite the Pentagon's failure to pass an audit in five years.

Iran (1)

• Saagar details Iranian Foreign Minister Goliboff's "all or none" stance: if Iran cannot sell oil in the region, no one else will, and all infrastructure will be vulnerable if Iranian security is not ensured. This doctrine includes targeting nations supporting aggression.

Other (5)

• Saagar quotes Ken Klippenstein, noting Hegseth's $1.5 trillion request over four years exceeds the estimated $4.5 trillion (inflation-adjusted) cost of the entire World War Two for the US. In contrast, Iran's military budget is $7.4 billion.
• The Pentagon estimates the Iran War has cost $37.5 billion through September 30, but Krystal and Saagar contend the real cost is closer to $100 billion, excluding significant munitions and replacement costs.
• Krystal highlights that the estimated $100 billion cost for the Iran War in 100 days rivals the total $100 billion spent over 20 years to rebuild the Afghan National Security Forces. The true cost, including munitions, could be $200-300 billion.
• The Pentagon faces an urgent budget shortfall from the Iran War, leading to limitations in training and maintenance, and has requested an immediate $67 billion infusion from the White House to cover costs.
• Krystal points to severe supply chain issues in US defense, citing one factory in Radford, Virginia, for guncotton and a single factory in Arizona for Tomahawk missiles, leading to multi-year production delays.

Diplomacy (3)

• Trump approved a landmark deal granting Saudi Arabia a civilian nuclear program and potential uranium enrichment, spanning 30 years and estimated at tens of billions for American companies.
• Ryan criticized the Saudi nuclear deal, citing Saudi Arabia's history of "reckless wars," an impulsive authoritarian leader, and alleged involvement in 9/11 and the Khashoggi killing.
• Israeli Finance Minister Bezalel Smotrich declared the ongoing US-Iran confrontation "the best one for us," as Israel benefits from degraded US military infrastructure without direct involvement.

Physics (1)

• The Executive Director of the Nonproliferation Policy Education Center warned that Saudi nuclear development could spur proliferation in the UAE, Turkey, and Egypt.

War (5)

• US air strikes against Iran continued for an eleventh consecutive night, targeting maritime capabilities, drone facilities, and aircraft hangars to degrade threats in the Strait of Hormuz.
• Trump claimed ongoing strikes would target "Pickaxe Mountain," which Ryan identified as a rebranded part of the Natanz nuclear complex, supposedly "obliterated" in the "Twelve Day War."
• Iran retaliated for a prior US strike on conscripts by targeting US military personnel, leading to three American soldiers killed and 100 wounded at Tower 22 base in Jordan.
• Secretary Hegseth requested an additional $67 billion for the war on Capitol Hill, bringing the total estimated cost for the Iran conflict to $37.5 billion.
• A Wall Street Journal article outlined US and Israeli plans to spark a civil war in Lebanon by training elite Lebanese armed forces to disarm Hezbollah.

Trade (1)

• The Houthis in Yemen banned Saudi-flagged ships or those docking in Saudi ports from passing through the Bab-el-Mandeb Strait, leading to immediate U-turns by Saudi tankers.

War (4)

• Saagar reports four US service members were killed within a 24-hour period: three at a base in Jordan and one in Iraq from an unexploded Iranian drone. Krystal adds the Pentagon withheld information on dozens of US military injuries across the region.
• Martaza Hussein explains Iran's missile strategy initially used older missiles to deplete US regional defenses, now deploying more accurate, advanced missiles. He critiques US air attacks for wasting expensive munitions on Iranian underground bases, which quickly resumed operations.
• Saagar reports Yemen's Houthis announced a maritime embargo against Saudi Arabia in the Bab al Mandeb Strait, impacting 4.5 million barrels per day of Saudi oil exports. Martaza Hussein views this as a worst-case scenario threatening global economies.
• Krystal states Ukraine's attacks have idled over half of Russia's oil refinery capacity, impacting global diesel supply as Russia is the world's second-largest exporter. This further strains an already redlined global economy.

Diplomacy (1)

• Martaza Hussein argues that US actions have broken trust with Iran, making a diplomatic deal unlikely due to past violations and attacks during negotiations. He suggests a regional veto by Gulf Arab states on US military presence might be the only path to de-escalation.

Energy (3)

• Saagar and Krystal identify China's reduced oil imports as crucial for preventing catastrophic prices, as buying plummeted from 12 million to below 6 million barrels per day. They warn a rebound in Chinese demand will significantly pressure the global market.
• Saagar warns that national gas prices are back to $4.00 a gallon, and US crude oil inventories have only 43 days of supply remaining. This is the lowest level in 45 years, making the market extremely vulnerable to disruptions.
• Krystal observes oil prices, like Brent crude at $88-89 per barrel, fluctuate based on market "hopium" over proposed negotiations, despite grim indicators. She points to a disconnect between sentiment and the dire reality of dwindling global oil supply.

War (9)

• Eric Schmidt reports a Friday barrage of Iranian missiles and drones hit a major air base in Jordan, killing at least two, possibly three, U.S. Army soldiers and injuring several others. This attack follows a week of hostile exchanges as the ceasefire collapsed.
• Eric Schmidt states that with the deaths in Jordan and another Army soldier killed in Iraq by an Iranian drone, the total number of Americans killed in the war has reached 17.
• Despite over 13,000 U.S. strikes damaging Iran's Air Force and Navy, Eric Schmidt notes Iran retained robust capabilities, including numerous attack drones, mine-laying boats, and missiles. American officials believe Iran used the ceasefire to rebuild these capabilities.
• Michael Barbaro suggests the ceasefire has become a pretext for the administration to disclose less about the war's true state, while Eric Schmidt explains that acknowledging new deaths during a ceasefire challenges the narrative of reduced risk.
• Eric Schmidt details the war's expansion, now involving countries like Bahrain, Kuwait, UAE, Saudi Arabia, and Jordan. Iran's strategy aims to inflict pain on U.S. allies by targeting civilian infrastructure to pressure the U.S. or make allies reconsider hosting its military.
• Iran is threatening to activate the Houthis in Yemen, leading Saudi Arabia to launch preemptive strikes. Eric Schmidt reports the Houthis responded by threatening to close the Red Sea to Saudi traffic, opening a second front in the five-month-old war.
• Both sides are striking a wider range of targets. The U.S. now hits civilian infrastructure like bridges (dual-use), while Iran targets energy sites and critical desalination plants, indicating an escalation in the perceived tolerable human toll.
• The U.S. maintains about 15,000 troops for the naval blockade and 50,000 troops overall in the region and Europe supporting the campaign. Eric Schmidt states that fighter jets like F-16s and F-35s are being rushed back to the Middle East from Europe.
• Eric Schmidt warns that withholding war details from the public, especially during escalation, carries the risk of obscuring the true dimensions of the conflict. He notes the Pentagon disclosed 100 injuries since July 7th only after New York Times reporting.

Business (1)

• A federal judge temporarily halted Paramount's $11 billion purchase of Warner Bros. Discovery following an antitrust lawsuit from 12 Democratic states, which argues the merger would harm movie theaters, TV providers, and audiences.