The fragile illusion of cheap energy and endless tech valuations is about to shatter under the weight of real-world power geopolitics and an escalation trap. While markets have been lulled into complacency by temporary fixes and speculative games, recent escalating conflicts—from the Strait of Hormuz, in which a huge chunk of global oil supply flows through, to potentially the Red Sea, and Ukrainian drone strikes on Russian oil infrastructure are poised to send oil prices surging beyond previous highs. This does not just entail higher prices at the pump but will expose the house of cards in AI hype, force the Fed’s hand, and hammer vulnerable economies in East Asia and the Gulf, triggering a full blown global financial crisis or another great depression.
Oil prices have defied gravity, climbing way back down, despite oil supply from the Strait still being a fraction of pre war levels. This is not because Trump resolved the Hormuz crisis with his MOU with Iran but rather that Strategic Petroleum Reserves have been tapped like a piggy bank, a short-term Band-Aid solution that masks structural vulnerabilities, and now reserves are running low. China, the world’s factory and a massive oil importer, has been cutting back demand amid its own economic slowdown, providing another artificial damper. On top of this, Wall Street speculators shorting markets, derivative plays, and bets on stability, due to the MOU, override reality regarding the global oil supply.
Trump, as the dealmaker, had motives to calm the waters in diplomacy with Iran while not actually being committed to ending the war. For instance, JD Vance’s statement about “buying time” for oil markets reflects why Iran can’t trust America to make a peace deal and why the MOU between the US and Iran fell apart. The fact that the MOU was so favorable to Iran proves that it was bullshit, though many officially thought it was the US surrendering to Iran. Trump said that he did not want to become another Herbert Hoover but he escalated anyways.
