A Bystander’s Calm Analysis

I chatted with a few friends and found that everyone’s emotions are rather high-strung. Some people are already getting ready to buy the dip in energy. Others are so frightened that they’ve cleared out all their positions. I think both of these are too extreme.

I’ve sorted out the situation as it stands, and there are several facts worth noting. First, Iran is indeed accelerating its military buildup—this isn’t something made up out of thin air, and multiple sources can corroborate it. Second, the U.S. withdrawal of its citizens is a real move, not just diplomatic phrasing. Third, the shipping costs through the Strait of Hormuz have already been rising, and the market is casting its vote with real money. Fourth, talks really are stuck; the differences are not shrinking but getting bigger.

On the other hand, several factors are also constraining the situation from spiraling completely out of control. No one among the world’s major powers truly wants a full-scale war—the cost is too high. Iran’s economy can’t sustain a prolonged standoff. It’s also an election year in the United States, so it has no incentive to fight a war. So, the most likely outcome is some kind of strange middle state: neither war nor peace, with fighting and pauses, both the negotiation table and the battlefield on their toes, neither side wanting to fully admit defeat, and neither side able to withstand a full escalation.

In this kind of situation, the market is most likely to go with a path of repeated whipsawing. One piece of news comes out and it surges sharply; two days later, when rumors are debunked or conditions ease a bit, it falls back. People trying to trade the trend could end up slapped in the face by both sides, while swing traders may actually do well like fish in water. Oil prices will certainly have upward momentum, but whether they’ll rocket straight up depends on whether something truly big happens on the other side of the strait.

My own strategy is to participate with a light position, focusing on risk control. At times like this, don’t think about getting rich quickly—surviving is more important than anything. History tells us that in every geopolitical crisis, some people get rich, and more people end up getting liquidated. Which one do you want to be?
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