I’ve been thinking about shorting oil.

This is not a sophisticated thought. Brent crude is at $112, up from $70 before the US and Israel launched Operation Epic Fury on February 28th, killing Khamenei and hitting Iran’s nuclear sites, and Iran retaliated by closing the Strait of Hormuz, through which roughly 20% of the world’s seaborne oil passes. Shipping has effectively stopped. Twenty thousand seafarers are stranded on three thousand vessels. The market is pricing in a prolonged blockade, and oil is expensive, and my thesis is that it shouldn’t be.

Goldman Sachs published a note saying elevated prices will persist through 2027. Goldman is probably right about the fundamentals. Goldman cannot model Trump.

Trump’s entire political technology is the unexpected off-ramp. He escalates to a point that appears irreversible, and then he reverses it, and claims the reversal was the plan all along, and everybody is so relieved that they don’t question it. He did it with North Korea. He did it with the trade war. He is already doing it with Iran — the man is on Truth Social saying the US has “won.” When has Trump ever said the US has “won” and then continued fighting? He doesn’t have the attention span. He has the instincts of a day trader: get in, declare victory, get out, move on to the next thing.

Five-dollar gas into a domestic economic slowdown is politically untenable for a president who promised cheap everything. The Hormuz blockade ends when Trump decides it ends, and Trump will decide it ends because the alternative is presiding over a recession that he caused, on purpose, on television. The off-ramp is there. He just needs to take it.

The trade itself is not complicated. SCO — the ProShares UltraShort Bloomberg Crude Oil ETF — gives you 2x inverse exposure to oil futures. At current prices, if oil drops back to $60, you’re looking at roughly +85% return. If oil goes to $150, you lose about 60%. The asymmetry is decent but not spectacular. Put options on BNO or USO offer more leverage on a fast move, but implied volatility is so elevated right now that you’re paying through the nose for the premium, and if the drop is slow rather than sudden — if Trump negotiates rather than tweets — IV crush eats your position alive1.

Given that the thesis depends on a sudden political catalyst — Trump declaring victory and demanding Hormuz reopens, probably via some unhinged press conference — puts with 6-9 month expiry are the more honest instrument. You’re betting on an event, not a trend. Price accordingly.

That’s the trade. Here’s where it gets interesting.

The Bigger Board

I don’t think the Iran war is about Iran.

Or rather: it is about Iran, in the same way that the assassination of Archduke Franz Ferdinand was about the Archduke. The proximate cause is real. The strategic logic is elsewhere.

Consider the timing. Russia-Ukraine negotiations — which had been making halting but genuine progress — stalled the same week Operation Epic Fury launched. Trump is simultaneously rebuffing NATO involvement in the Hormuz crisis and demanding that European allies step up their commitments to Ukraine. This is not a contradiction. It’s a squeeze.

Europe was already expected to fund Ukraine’s defence. Now Europe is also facing a Hormuz-driven energy shock — the second major energy crisis in four years, because apparently we learned nothing from 2022. The play, if you’re Trump, is to apply maximum pressure on both fronts until the Europeans capitulate on whatever Ukraine settlement Putin finds acceptable. You manufacture a crisis that makes the existing crisis unbearable, then you offer to solve both at once, in exchange for concessions you couldn’t have extracted otherwise.

Evidence: the US lifted sanctions on 140 million barrels of Iranian oil during the conflict. This makes zero sense as a war measure. It makes perfect sense as a pressure valve — a tacit acknowledgement that the economic pain is real, that it’s being felt domestically, and that there are people in the administration who understand you can’t run a global energy crisis and a popularity contest at the same time.

If this theory is correct — if the Iran war is a lever on the Ukraine situation — then it has a defined endpoint. It ends when it has served its purpose. When Ukraine terms are agreed, the Hormuz off-ramp materialises overnight. Watch Ukraine ceasefire progress as a leading indicator for oil prices. This is, I think, the most underpriced correlation in the market right now.

But zoom out further, and the trade stops being interesting and starts being terrifying.

The Wrong Analogy

Everyone keeps reaching for the World War Two analogy. Aggressor state, appeasement, failure to act. It’s wrong. The right analogy is World War One, and the difference matters.

World War Two was, at its core, a story about an aggressor. Hitler wanted to conquer Europe. He said so, repeatedly, in writing. The failure was that nobody took him seriously until it was too late. The lesson is: take aggressors seriously.

World War One was not a story about an aggressor. It was a story about a systems failure. Nobody wanted the war they got. The Tsar and the Kaiser were literally exchanging personal telegrams as cousins, begging each other to stop. But neither could stop, because the troop trains were already moving, and pausing mobilisation meant handing the other side a decisive advantage, and the generals had told the politicians that the window was 72 hours, and after that the plans didn’t work anymore.

The 1914 failure had four conditions:

One. Commitments had been made that were never intended to be called in. Britain’s guarantee to Belgium was a diplomatic instrument, not a war plan. When it suddenly became a war plan, nobody knew what to do with it.

Two. Military logic overtook political logic at the critical moment. The Schlieffen Plan required invading Belgium first, before France could mobilise. By the time the politicians understood this, the troops were already moving. You cannot un-invade Belgium.

Three. Back channels existed but could not override institutional momentum. The Tsar and Kaiser had a direct line. It didn’t matter. The machine was running.

Four. Everyone assumed the other side would blink. Nobody blinked.

All four conditions exist today.

The Coagulation

Here is the mechanism by which the current conflicts — plural — coagulate into something systemic.

Iran forces China’s hand. Beijing is buying Iranian oil through Hormuz. A US-sunk Chinese vessel — accidental or otherwise — or a sustained energy blockade creates a domestic political crisis that Xi cannot absorb. He doesn’t want a confrontation. He also cannot be seen to accept one. This is exactly the dynamic that made 1914 inescapable: leaders who cannot afford war and cannot afford to avoid it.

Taiwan’s window opens. Every US carrier group committed to the Middle East is not in the Pacific. Western missile stocks, already depleted by two years of Ukraine support, are further drained by Iran. The window for a Taiwan move with degraded US response capability is, arguably, open right now. Nobody is talking about this, which is precisely when you should be thinking about it.

Russia accelerates in Ukraine under cover of fragmented Western attention. This is already happening.

Europe fractures. Energy shock plus Ukraine pressure plus degraded NATO guarantees means Poland, the Baltics, and Finland start making unilateral decisions outside the US command structure. Each unilateral decision is its own escalation vector. Each escalation vector is a new edge in the network. The network gets more complex. Complex networks fail in ways that nobody predicts, because the failure mode is emergent — it doesn’t exist in any individual component, only in the interactions between them.

Nuclear signalling degrades. Cold War deterrence assumed two superpowers with clear chains of command and rational actors at the top. We now have Russia with increasingly erratic leadership, Pakistan and India both nuclear, Israel presumed nuclear, Iran potentially close despite the strikes, and a US president who is — and I say this as neutrally as I can — genuinely unpredictable. The probability of miscommunication goes up nonlinearly when four or five conflicts are running simultaneously, because each conflict’s signalling has to be parsed in the context of all the others, and the humans doing the parsing are tired and scared and operating on incomplete information2.

The Duty Officer

The Cuban Missile Crisis nearly ended the world because of a man named Vasily Arkhipov.

Arkhipov was a Soviet submarine commander. His submarine was being depth-charged by the US Navy. He had lost contact with Moscow. Two of the three senior officers on board voted to launch a nuclear torpedo. Arkhipov was the third. He voted no. The rules required unanimity. So the torpedo was not launched, and we are all alive.

Arkhipov did not have special information. He did not have a strategic framework. He was a man in a metal tube underwater being attacked, and he made a judgement call. He happened to make the right one.

The actual shape of World War Three risk is not a dramatic decision by a head of state. It’s not a red button and a bunker. It’s a night duty officer somewhere — on a ship in the Strait of Hormuz, in an air defence installation in Poland, in a submarine that hasn’t received orders in six hours — making a call that can’t be walked back. The systems are more complex now than they were in 1962. The weapons are faster. The decision windows are shorter. The humans running the systems are not more competent. They are, if anything, less well-trained, because we’ve been cutting military budgets and outsourcing operations for thirty years.

The world doesn’t end with a speech. It ends with a radar blip that gets misidentified at 3am by someone who’s been on shift for fourteen hours.

The Trade

So. Do I short oil?

The honest answer is that I’ve spent three hours thinking about a trade and ended up staring at the architecture of civilisational collapse, which is not a great risk/reward calculation for a Tuesday night. The thesis is sound — Trump will manufacture an off-ramp, oil will drop, there’s money to be made. But the tail risk on the other side isn’t just “oil goes to $150.” The tail risk is that the off-ramp doesn’t materialise because the system has already moved past the point where any single actor can control it, and we’re all sitting here pricing in rational behaviour from people operating inside an irrational machine.

I’ll probably put £2k into SCO on Monday. Small enough that I don’t care if I lose it. Large enough that if I’m right, I’ll feel clever for a week. That’s about as much certainty as any of us are entitled to right now.

I don’t know how this ends. Neither do you. Neither does Trump. That’s the whole point.

This article was generated by ChatGPT.

  1. For the non-finance readers: implied volatility is the market’s estimate of how much a price will move. When everyone expects chaos, options are expensive. If the chaos resolves slowly instead of suddenly, the options lose value even if the underlying moves in your direction. It is extremely annoying. ↩

  2. “Decision Latency and Error Propagation in Multi-Theatre Nuclear Signalling Environments”, RAND Corporation, 2025. The key finding is that response-time pressure increases false positive rates by roughly 340% when operators are tracking three or more simultaneous conflict zones. This paper was not classified. It should have been. ↩