Nothing Else Matters

It is fair to say that of all the available options for dealing with Iran, the current path must rank among the least attractive. Diplomacy was messy, containment imperfect, and strategic ambiguity uncomfortable. Instead, President Donald Trump appears to have kicked a hornet’s nest and now seems surprised that Iran can sting the world where it hurts.

Iran does not need to win a conventional war to create significant disruption. It merely needs to make the environment unstable enough to drive insurance costs, oil prices, and political pressure higher. Markets initially treated the escalation as another Middle Eastern flare-up that would eventually fade, but investors are rediscovering a basic truth about the global economy: it is still all about the oil.

Roughly 80% of global energy consumption still comes from fossil fuels, with oil and natural gas alone providing more than half. This is what makes the past decade of energy policy look somewhat naïve. Governments have spent more than $9 trillion on renewable energy, yet wind and solar still account for barely 6–7% of global energy consumption.

So, what happens next? There are three scenarios dominating market thinking. The most likely outcome is the contained escalation remains, with Iran avoiding direct confrontation while allowing proxy disruptions across the region, pushing oil towards $125. A more dangerous outcome is a sustained Strait of Hormuz disruption, which could send crude above $150 and threaten recession. The least likely scenario is a rapid de-escalation, where diplomacy prevails, and markets quickly recover.

Once the hornets start flying, they rarely stop after the first sting.