‘War is merely the continuation of politics by other means.’

—Carl von Clausewitz

 

Let’s face it: predicting how a war is going to play out can be tough. Maybe even dicey.

Even the smartest people in the room can find themselves caught off-guard when events defy their expectations.

Just ask Bill Mitchell…

 

Source: Bill Mitchell / X

 

Of course, victory was never going to be that easy. It’s now August, and the situation in the Persian Gulf feels like a stalemate. Iran is proving to be a formidable adversary. Here’s why:

  • Since 1979, the Iranians have been fighting three separate and distinct cold wars.
  • The first is with what they call ‘the Great Satan’ — the United States.
  • Then the second is with what they call ‘the Little Satan’ — Israel.
  • Finally, the third is with their regional Sunni rival — Saudi Arabia.

My own observation is that Iran has been hardened by decades of conflict. Its national character is one shaped by guerrilla-style fanaticism. Dying for a cause is not just acceptable but actively encouraged:

  • The clerics and generals who run Iran are often described as psychopathic. But you shouldn’t forget: they are also paranoid and xenophobic. They are deeply hostile to the outside world. Their decision to hold the Strait of Hormuz hostage is a natural expression of this.
  • Of course, they have a serious home-field advantage. Iran is a rugged, mountainous country that’s larger than Afghanistan and Iraq put together. In other words: this battlespace is not an easy one to pacify, let alone control.

 

Source: a16z / X

 

No doubt, this has been a tough fight, and the conflict has been filled with mixed signals. I’m talking about half-baked ceasefires and shaky deals. Nevertheless, the stock market has shrugged off the fear:

  • After the correction in February, it took only 11 days for the market to bounce back and hit a new all-time high. This ranks as the quickest recovery ever.
  • Remarkably resilient? Absolutely. But this is not the only fascinating trend to unfold. I’ve observed that even as the Strait of Hormuz was choked up by drones and missiles, some traders have been trying to profit from the turmoil.
  • For a while now, I’ve been watching a speculative instrument that has spiked almost 2,000% this year, boosted by the fog of war.
  • Is this just a lucky accident? Or is this a credible attempt to hedge against oil disruption? Let’s dig in…

 

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