Over 100 million years ago, South America and Africa began to drift apart, and in the narrow seas between them, thick layers of rock and salt gradually accumulated along what are now the coasts of Brazil and West Africa. Buried beneath those layers is an enormous amount of oil, with Brazil’s pre-salt resource commonly estimated in the tens of billions of barrels. Similar formations exist in the waters of Angola, Congo, and Gabon.

Although geologists long suspected it contained a large energy bounty, Brazil’s pre-salt was historically difficult to drill because it behaves like a slow-moving, plastic material that flows and squeezes around the wellbore, constantly threatening its stability and integrity. After years of intense investment by Petrobras and its international partners, sufficient technological advances were made, and the company estimates the breakeven cost of production from such formations at $30–40 per barrel. The oil majors are nothing if not deflationary machines.

The breakthroughs have catapulted Brazil into the largest oil producer in South America and among the top ten in the world. According to the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP), the country’s production recently surpassed 4 million barrels per day (bpd). If the current growth trajectory continues, it won’t be long before Brazil passes Iran on the leaderboard:

Adding to the importance of Brazil’s oil growth trajectory is the fact that the country has historically consumed only about 2.5 million bpd of the stuff, meaning each incremental barrel is available for export—all the more precious in the aftermath of the closure of the Strait of Hormuz. Anyone with spare production capacity profits handsomely from the resulting spike in prices.

While the economic benefits of being a global top-ten oil exporter are obvious, the associated risks were laid bare when the US military removed former Venezuelan President Nicolás Maduro and waged a pre-emptive war on Iran. The cover story for these operations may have involved, respectively, drug cartels and the well-worn “weapons of mass destruction” trope, but it would be naïve not to consider what is actually going on.

The fact that Brazil is the “B” in BRICS, and that one of our operating mental models sees the US immersed in World War III against all who support the main mission of that organization, means it’s time to speculate on the odds of a major hot war in the Western Hemisphere. When the totality of the evidence we are about to present is considered, there can only be one conclusion: The risk of a military conflict between the US and Brazil is far higher than most geopolitical analysts and political strategists are currently gaming. Let’s lay out the case.

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What is the appropriate price of oil? Given a set of supply, demand, and inventory numbers, where should the world’s most important commodity trade? For obvious reasons, the war in Iran and the closure of the Strait of Hormuz have brought this question to the forefront of market analysis, and a digital avalanche of opinions on the subject now proliferates across social media. Depending on one’s viewpoint—or, perhaps more accurately, one’s level of experience in studying such matters—current action in the oil markets is either a logical reflection of the integral of market forces or the greatest conspiracy of price suppression in the history of finance. Determining which end of this thought curve is worthy of occupation motivates today’s missive.

One significant challenge is that the question itself involves an important bit of trickery, as there is, in fact, no singular price of oil. Absent the specification of grade, location, and especially timing of delivery, the price of a barrel of oil has no meaning, and yet market reporting necessitates a gross simplification of the matter.

When quoting the price of oil in North America, commentators are almost always referring to the front-month futures contract for West Texas Intermediate (WTI) on NYMEX/CME, with physical delivery at Cushing, Oklahoma. When the rest of the world quotes the price of oil, they are most often referring to the front-month ICE Brent crude futures contract in Europe, which prices a large share of globally traded seaborne crude. To confuse matters further, because exchanges often use different expiry schedules—the mechanics of delivery are not universal, after all—the definition of “front month” is not itself standardized.

That billions of dollars are traded daily, incorporating a plethora of nuances, makes the oil markets no place for amateurs—one of many reasons you will not find us in the pits. We have far too much respect for our limited capital and for the expertise of those who do it for a living to be the fools at that particular poker table. That does not mean useful information cannot be gleaned from the market action, however, and there has been no shortage of fascinating and unexpected developments in this regard since the war broke out.

One development that caught attention in the Twitterverse is the extreme backwardation seen in global oil prices—a phenomenon in which oil that can be delivered sooner is priced higher than oil promised to arrive at a later date. That backwardation is a normal market response to shortages has been obscured by the sheer scale of what the Iran war has triggered and by how unfamiliar such behavior is to the cadre of newly minted expert oil traders on social media.

To visualize the phenomenon, consider the price spread between Dated Brent—oil with a delivery date attached to it and thus a proxy for spot prices—and its associated front-month contract. During normal times, this spread is minimal, but the Iran war pushed it to levels far exceeding those observed during the early weeks of the war in Ukraine:

To some, this price action is not normal, but instead is proof that the “real” price of oil is much higher than the “fake paper” prices “they” are allowing to print on our collective screens. There are many versions of this claim, but this particular one—sent our way by many subscribers, with several hundred thousand views at the time of writing—captures the essence:

“I’m watching the numbers flicker on the screen -- Brent crude at $92, WTI hovering near $97 -- and I feel a profound sense of dread. This isn’t a market; it’s a meticulously crafted fiction. We are being lied to on a scale so vast it defies comprehension. The current paper price for oil is a government-constructed lie, a narrative woven by desperate authorities to maintain a false sense of stability while the physical foundations of our world crack beneath us.

This manipulation isn’t just an economic curiosity; it’s a trap. While futures traders cheer a modest pullback, the real cost of a barrel -- the tangible liquid that powers tractors, heats homes, and transports food -- has already rocketed into another dimension. This divergence between paper and physical represents the single greatest threat to global order I’ve witnessed in decades. It’s a dangerous fiction masquerading as reality, and its inevitable collapse will redefine everything we know about energy, money, and power.”

There is, of course, a much more innocent explanation for these prices, one that does not involve a grand conspiracy of manipulation. Instead, it involves a fair probability-weighting of two outcomes so unprecedented in their polarity that there is no accurate historical precedent by which to model them. Once properly contemplated, not only does the recent price action make sense, but the volatility that will surely follow does as well. Let’s unravel the mystery and brace for impact.

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At its zenith, the German nuclear power sector was the envy of the world. By the turn of the century, the country operated 19 of the most sophisticated and reliable nuclear reactors on the planet, churning out 170 terawatt-hours (TWh) of baseload electricity per year. With proper care and maintenance, these facilities could have been effectively immortal, a perpetual anchor to a globally elite economy. What followed—which is well-trodden territory in these pages—was one of the greatest own goals in geopolitical history.

Those 170 TWh of power would come in handy for the European Union (EU) now, as it stares down the barrel of what looks increasingly likely to become the greatest energy crisis of this generation. While much attention will understandably be paid to upcoming regional stockouts of jet fuel and diesel—and the degradations to modern life they will trigger—a slower-rolling yet equally challenging crisis is unfolding. In a scandal that defies belief, the member states of the EU have exited the winter of 2025–2026 with disastrously low stores of natural gas just as the war in Iran has closed the Strait of Hormuz, taking 20% of the world’s supply of liquefied natural gas (LNG) offline.

To quantify the scale of the challenge, it is best to combine the production and consumption statistics of the EU, Great Britain, and Norway (collectively, the EU+2). The latter two, the largest natural gas producers in Europe, are not members of the EU itself but are fully connected to it via pipeline. A quick perusal of the Statistical Review of World Energy indicates that the EU+2 produces less than half the gas it consumes, a gap of roughly 20 billion cubic feet per day (bcf/d). This is approximately equivalent to the entire natural gas output of the mighty Permian Basin.

As the refilling season begins in earnest, there is little room for error and no tolerance for a long, drawn-out war in the Middle East. A bad outcome is all but guaranteed—energy prices will rise, and deindustrialization will continue—but whether a true catastrophe can be avoided is the question at hand.

Gauging the EU’s progress on its upcoming journey requires mapping major gas inflows, assessing whether those pathways are in significant jeopardy, and listing the risks to keep a close eye on as geopolitical developments evolve. Having done this work over the past week, we present our findings here.

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Few practitioners enjoy wrapping linguistic complexity around straightforward concepts more than biologists, which explains how Nietzsche’s 1888 truism on resilience came to be rebranded as “stress-induced mutagenesis” a century later. Among those who study living organisms and life processes, the term is applied to situations in which external stresses trigger an increase in mutation rate that boosts genetic diversity and can accelerate adaptation.

The phenomenon is especially evident in the field of oncology research. When doctors treat cancer with novel therapies, the treatments themselves place tumor cells under intense stress. In response, some cancer cells switch into a kind of “error-prone” mode in which they start making more genetic mistakes than usual. Most of those mistakes are useless, but a few can give cells the ability to survive the very drugs meant to kill them. Over time, this stress-driven trial-and-error process can leave behind a tougher, more drug-resistant cancer that is harder to treat, let alone cure.

As Nietzsche astutely observed, this concept thrived in the theater of war long before it was discovered in the lab. Consider the impact of the sanctions war on the Russian economy after the conflict broke out in Ukraine. The avalanche of sanctions was historic, forcing Russian President Vladimir Putin to oversee the selection of “resistant” traits across nearly all aspects of Russia’s domestic economy by rapidly hacking together parallel imports, homegrown substitutes, and yuan-denominated finance to emerge as a stronger industrial power than before the war began.

The war with Iran can be modeled as a set of two competing attempts to impose sufficient stress to overwhelm mutagenic responses: (1) the longtime sanctions against Iran, which have forced an unexpected resiliency, and (2) the current oil blockade in the Strait of Hormuz, which will come to strengthen energy markets against future concentrated points of control. Each side is racing to adapt at a pace that dulls its opponent’s efforts. Which camp prevails will undoubtedly shape the next several decades of geopolitical evolution. Let’s contextualize the metaphor further in search of clues as to how this war will ultimately end.

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Although it is difficult to say with certainty, there are strong indications that the war in Iran may be past its apex. Yes, the current ceasefire is shaky, hostilities will likely continue in fits and starts, and the reopening of the Strait of Hormuz is unlikely to be accomplished in a linear manner, but the odds of worst-case outcomes—the complete destruction of critical oil, gas, and civilian water infrastructure in the Middle East, or the use of nuclear weapons—seem to be ebbing. Predictably, the deluge of after-action assessments has begun.

There are many questions to ponder. Here is a partial list of some of the big ones: Who won the war? How did the war impact America’s global standing? Iran’s? Israel’s? Was the NATO alliance strengthened or weakened by the war? What does the war teach about the effectiveness of modern weaponry? How will it impact the relationship between the US and Israel, or shape President Trump’s standing on the global stage? What will become of the US dollar, its dominance in global trade, and the effectiveness of sanctions as a tool of coercion? Is the aircraft carrier era over? What other military technology might be made obsolete because of advanced missiles and drones?

Much ink will be spilled in pursuit of the answers to such questions, and we certainly have thoughts on many of them, but our mission is to contemplate how the war impacted energy markets. Some of the price action across the hydrocarbon complex has been downright confounding, leaving many investors frustrated that things didn’t go as they had predicted, or wagered.

History teaches that while price signals are imperfect, they often reflect hard and unforgiving truths. Having studied the behavior of various oil and gas markets throughout the war, we arrive at three important conclusions that energy investors should internalize before committing their capital going forward. Let’s take each in order.

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We begin with two objective facts. First, no country should be more vulnerable to an oil shock than China. To a rough approximation, China consumes 16 million barrels per day (bpd) of oil while producing only 4, relying on imports to close the gap. Despite Herculean efforts spanning decades, the country has yet to crack the technical challenges associated with exploiting its vast shale oil resources, nor have its ultradeep drilling efforts borne significant fruit. According to the Statistical Review of World Energy, China produced only as much oil in 2024 as it did in 2014, while consumption grew nearly 50% over the same period.

The second undeniable axiom is that China has done its level best to assist Iran in the current war. The two nations signed a 25-year comprehensive strategic partnership agreement in 2021, and open-source intelligence points to extensive collaboration between them as Iran resists the combined onslaught of the US and Israeli militaries. Several recent articles lay bare how China is providing dual-use industrial goods, satellite intelligence, and other technologies that enhance Iran’s missile and drone performance and air defenses. It is also providing diplomatic cover at the United Nations and undoubtedly pumping Iran with all manner of critical goods to help its population deal with the hardships of war.

These two truisms make the fact that Iran has made closing the Strait of Hormuz a central element of its war strategy a bit of an enigma. Yes, the maneuver is undoubtedly the most effective card Iran has in hand, and playing it has exacted huge pain on global economic interests and generated disproportionate leverage with a clearly frustrated US President Trump; however, it also puts serious pressure on China, dependent as it is on the flow of oil from the Middle East.

Effectively, China has decided that it is in China’s interest to help Iran hurt China.

Pulling on this string over the past several weeks has led us to a new mental model to explain the war, pointing to a post-conflict geopolitical realignment that will profoundly reshape global energy markets. Let’s explore the confines of it and see where that leads.

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Just hours before the war in Iran kicked off, North Dakota District Court Judge James D. Gion issued a final judgment ordering several Greenpeace entities to pay $345 million to Energy Transfer to compensate for their destructive role in the 2016–2017 Dakota Access Pipeline (DAPL) protests.

Among those ordered to pay was Greenpeace USA—and because the judgment is larger than its yearly revenues and far exceeds its readily available assets, the case is understandably considered existential for that organization.

For a US state with a population just under 800,000, North Dakota punches well above its weight in global energy markets. Representing one of the Union’s more conservative states, local leaders made the political decision to aggressively develop the Bakken Formation, an attractive shale play that helped push oil production to over 1 million barrels per day (bpd) in just a few years. Local politics also made it a particularly poor place for Greenpeace and its allies to pull the stunts they did a decade ago—the DAPL project got built despite their protests, and now they are effectively insolvent.

Halfway around the world and on the opposite end of the hydrocarbon political spectrum sits Australia, whose population of over 28 million could have the entirety of its oil demand met by North Dakota’s production. The Land Down Under consumes roughly 1.1 million bpd of oil, but only meets about a third of that with domestic production. Worse still, Australia is no longer a major oil refiner, with nameplate capacity to produce fuels like gasoline, diesel, and jet fuel able to cover only a fifth of its needs. It’s not that the country can’t operate refineries; it simply chose to stop building them and allowed existing facilities to wither into obsolescence. Greenpeace Australia Pacific surely celebrated those decisions.

Iran’s closure of the Strait of Hormuz has laid bare the folly of Australia’s energy stance, and the country barrels towards shortages and catastrophe. Although hardly to blame for the crisis, current Prime Minister Anthony Albanese is in the unfortunate position of having to deal with it. There are few good options available to him, and several bad ones. Recently, he bowed to political pressure and made a decision that will only make matters worse:

“Australian Prime Minister Anthony Albanese said on Monday the government would halve the excise on ‌fuel and diesel and remove the heavy road user charge for three months to help households cope with a surge in costs driven by the Iran war.

Halving the tax would reduce the cost of fuel by 26.3 Australian cents per litre, Albanese said.”

As good as such gestures might feel, cheaper fuel will boost demand and make it more difficult to allocate limited supplies to the parts of the economy that need them most. Given their critical roles at the front end of Australia’s economy, farmers and long-haul truckers would seem to need priority access to diesel, for example, but the frenzy of crisis can make rational decision-making all but impossible.

The world might be in the early stages of what will become the most significant energy shock in modern times, but that hasn’t stopped policy advocates from aggressively pre-positioning for what comes after the crisis abates. Will the coming shortages be the death knell of the hydrocarbon era and herald an acceleration of the so-called green energy transition? Or will the disastrous consequences of flouting basic physics finally convince the pro-renewables crowd that it’s time for a serious rethink? For clues to where things are headed, the twin stories of Australia and North Dakota will almost certainly be instructive. Let’s find out why.

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Throughout the month of March, we wrote extensively on the happenings in Iran, sharing our methods for seeking information and interpreting events as they unfold. For this month’s Pro Tier presentation—After Hormuz: Punctuated Equilibrium in the Energy Markets—we’re taking a longer view and speculating on the global reorganiz…

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In July of 2016, the South Korean government of Park Geun-hye formally agreed to host America’s Terminal High Altitude Area Defense system (THAAD), the most powerful and reliable missile-interceptor technology in the US repertoire. The decision was not without controversy, both domestically and with China, South Korea’s largest trading partner. The Chinese argued that THAAD’s X-band radar could surveil deep into their territory and warned its installation would destroy relations between China and South Korea.

Despite these fervent objections, the Seongju THAAD battery was installed in 2017, with six launchers at that single site. After a period of economic reprisals, the South Korean government agreed to something of a détente with the Chinese, and no additional THAAD batteries have been installed since.

Although the fog of war is blinding, open-source intelligence and, eventually, reporting in legacy media outlets confirmed that Iran made targeting THAAD installations across the Middle East a priority mission in the early stages of the current conflict. Judging by what has been allowed to appear in print, it seems to have shocked US military planners with its success:

“New satellite images from several key military bases in the Arabian Peninsula suggest that Iran is seeking to degrade air defenses by destroying US-made radars that detect incoming missiles and drones. The radar system for an American THAAD missile battery in Jordan was struck and apparently destroyed in the first days of the US-Israeli strikes on Iran, a satellite image taken on Monday shows. Buildings housing similar radar systems were also hit at two locations in the United Arab Emirates, CNN analysis shows, although it is unclear if the equipment was damaged.”

Further evidence for the effectiveness of Iran’s THAAD strikes emerged with news that the US was removing at least parts of the Seongju installation and rushing them to the Middle East theater:

“A Washington Post report on Tuesday [March 10] citing two unnamed US government officials said that the United States had been moving parts of its Terminal High Altitude Area Defence (THAAD) anti-missile system stationed in South Korea to the Middle East, where the US is fighting a war against Iran.

According to South Korean media reports, the US has also begun sending Patriot missile defence systems to Saudi Arabia and the United Arab Emirates. Seoul has indirectly confirmed the moves.”

To most analysts, these events are but a notable detail in a much larger conflict. They might indicate Iran was more prepared to fight a protracted war than US military planners realized, or that the much-publicized US missile-interceptor shortage is as bad as feared. To our eyes, however, this news flow painted a confirmatory pattern for one of our most out-of-nowhere calls of 2025—namely that the physics of Korean reunification make it all but inevitable on a timeframe few are anticipating.

If we are right, such an event would provide critically important clues for the new geopolitical order that will emerge from the war with Iran. Let’s head to the Korean Peninsula and revisit this important question.

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What does it mean to win a war? The question is a particularly tricky one because it seems the answer should be obvious, and most people assume everyone agrees what winning looks like.

Conventional thinking dictates that a war is won when one side capitulates. This usually happens when the losing side’s capacity to fight is exhausted or when physical territory, like a capital city, is occupied. It was clear when the European and Pacific theaters of World War II were won by the Allies because representatives of Germany, and then Japan, signed agreements of surrender.

Assessing how a war is going while it is in progress is a trickier thing to ascertain, particularly in modern times. First, there is the blinding gloss of propaganda from both sides, which makes separating fact from fiction incredibly challenging—especially now, with the twin proliferation of social media algorithms and artificial intelligence (AI) deepfakes. Second, there is often a visceral personal bias at play that calls upon our instincts of survival and patriotism. This is nearly impossible to put to one side, understandably so.

For our purposes, a war is won when one side inflicts more pain than the other can tolerate, and a side is winning when it demonstrates the ability to do so. This immediately invites four questions, written in the first person for clarity: How much pain am I inflicting on the enemy? How much pain can my enemy tolerate? How much pain is my enemy inflicting on me? How much pain can I tolerate?

Having carefully defined the terms, let’s apply this framework to the current war with Iran.

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Panic buying during shortages is a classic example of human psychology driving herd mentality. Fear of going without, mixed with the belief that shelves might not be restocked quickly, makes it feel safer to overbuy than risk being caught short. The sight of empty shelves and other shoppers filling their carts to the brim with a sense of urgency can quickly trigger a collective stampede. The speed with which ample inventory goes bare often shocks management, both within the stores themselves and among those in government whose job it is to keep the calm.

In what must be one of the most predictable crises of the modern era, the leaders of Australia are currently grappling with an outbreak of preemption in the aftermath of the war in Iran:

“Prime Minister Anthony Albanese on Thursday urged Australians to avoid panic ‌buying of petrol and diesel, which he said had led to shortages in some rural regions, and stressed the nation’s fuel supply levels remained stable. Australia is dependent on imports for about 90% of its fuel needs, and fear ​of supply disruptions due to the escalating war in the Middle East has led to a ​doubling of fuel demand in some regions resulting in localised shortages.

Albanese said the ⁠federal government had already taken steps to ensure an uninterrupted supply of fuel into the ​country.

‘Our fuel supply is currently secure. However, I want us to be over-prepared,’ Albanese told reporters.”

The war in Iran—and the disruption of global crude and refined product supplies it has created—is simultaneously exposing how critical hydrocarbon fuels remain to the operation of all modern economies and how leaders of many important countries chose to deny that axiom. Through a mix of climate ideology and ignorance of basic physics, so-called progressives eschewed domestic oil and gas production and refused to stock sufficient inventories for times of geopolitical stress, as though not liking something diminishes its essentiality. Their populations are now set to suffer.

As the cases of Australia and its similarly unprepared neighbor, New Zealand, clearly demonstrate, island nations are particularly vulnerable to global energy shocks, dependent as they are on a steady procession of tanker ships to keep the pumps from running dry. Although islands have historically been more difficult to attack, they are far easier to embargo, and starving a garrison of supplies is typically a certain path to victory for the patient antagonist. The US famously demonstrated both sides of this strategy against Japan in World War II.

Almost lost in the headline-grabbing events in the Middle East are two separate and developing island standoffs that are not getting the attention they deserve on an individual basis, and we believe nearly everybody is missing how directly related they are. In our view, Russian President Vladimir Putin and Chinese leader Xi Jinping are setting a trap for US President Donald Trump, one that he looks all but certain to walk right into. If we are correct, World War III is about to take on a wholly more precarious dimension. Let’s connect the dots weeks before they might dominate international affairs.

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Sometimes it’s best to just stick with your first instinct.

When the war with Iran first broke out, we were—quite naturally—horrified. Regardless of our views on the justification for the joint US-Israeli preemptive attack, a full-blown kinetic conflict in the beating heart of global oil and gas markets was always going to be fraught with enormous risk. In the days after the first missiles were exchanged, we posted a series of articles that outlined what market indicators to keep an eye on, what moves US President Donald Trump might make to protect US consumers, and even the most important question on the board for those gaming the odds of escalation:

Is Iran still firing advanced missiles and drones in large numbers?

Despite consistent evidence in the affirmative, two weeks of war produced what we considered to be a relatively docile response by energy markets, with benchmark oil prices hovering close to—or even under—$100 a barrel. This prompted us to reevaluate our own assumptions and consider whether the price action might be justified, thoughts we shared openly with our subscribers in our last piece.

On Wednesday, any pretense of a reasonable off-ramp took a serious beating when news crossed the wires that Israel had bombed Iran’s South Pars gas field, the enormous hydrocarbon accumulation the country shares with Qatar. Given our recent insight into how Iran’s leaders would likely respond—thanks in no small part to our newly curated list of pro-Iranian Twitter/X feeds—we knew the following catastrophe would swiftly follow:

“A Qatari complex housing the world’s largest liquefied natural gas export plant suffered ‘extensive damage’ after a missile strike, hours after Iran threatened energy facilities across the Persian Gulf.

The Ras Laffan Industrial City was hit by an Iranian missile after four others were intercepted, authorities said late Wednesday. The site hosts facilities including the LNG plant, which typically accounts for about a fifth of global supply. Production there was already halted after an Iranian drone attack earlier this month.

The incident marks yet another escalation in hostilities in the region and follows a string of attacks targeting oil and gas infrastructure in recent days.”

While damage assessments continue, QatarEnergy has confirmed that both a gas-to-liquids facility operated by Shell and its LNG trains were hit and suffered significant damage. Good luck to the European Union as it works to refill its depleted natural gas stocks ahead of the upcoming winter.

It is difficult to imagine how the escalator halts its relentless ascent now—Trump’s belated attempt to put the pin back in the grenade notwithstanding. The Strait of Hormuz is unlikely to be opened anytime soon, oil and gas facilities across the region are now considered fair game by both sides, and the rest of the world had better prepare accordingly.

Shocked back to the reality of just how bad things could get, we took another look at an earlier musing we posted nearly two weeks ago on Substack’s Notes. In it, we expressed a conjecture that feels real enough to ponder in full now:

So, is Fortress North America really in the offing? A full accounting of the relevant molecular distribution across Canada and the US makes it far more likely than most can conceive today. Let’s explore the numbers and ponder the consequences.

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We begin with a confession. If you had told us six months ago that US President Donald Trump would launch an oil embargo on Venezuela, snatch its president, and bring him back to the US to stand trial; that Trump would collaborate with Israel to launch yet another preemptive strike against Iran, but this time with much more devastating effect; that Iran would respond by effectively closing the Strait of Hormuz, destroying numerous oil tankers, and bringing the war to every Gulf nation that houses a US military base; that the two warring sides would come perilously close to an all-out assault on the oil-producing assets of the Middle East; and that Ukraine would not only continue its assault on Russia’s energy assets but also attack oil tankers in international waters, we would have guessed that oil prices would skyrocket to much higher levels than those experienced over the past two and a half weeks.

That they haven’t is, frankly, a bit of a mystery.

Not that there aren’t some potentially plausible explanations being put forth by those long oil and hoping for prices to go higher. Perusing Twitter/X, we find two dominant conjectures. The first is that the market is simply wrong. It is mispricing the risk of escalation, underestimating the length of time the Strait will be closed, and reacting to Trump’s mercurial and erratic social media posts, which are clearly designed to keep a lid on oil prices.

The second and somewhat more far-fetched explanation is that Secretary of the Treasury Scott Bessent is manipulating the price of oil by “shorting the futures,” something members of the Trump administration have certainly jawboned as a possibility. While we freely admit that we are not experts in market structure, this sounds rather similar to “naked shorting,” “synthetic shares,” and other market ghosts that have become a common lament among disappointed investors in the post-Covid era. Do interested governments sometimes intervene in strategic markets? Almost certainly. Is Bessent primarily responsible for the comparatively docile oil price action in the face of these headlines? Consider us dubious.

Of all the markets we follow, the market for oil and its related commodities is among the most brutally efficient. Major participants tend to be incredibly sophisticated players with intelligence capabilities rivaling those of small nations, and they often reside in locations less encumbered by insider-trading laws than the average retail investor. If an edge on the market can be developed, it will be ruthlessly exploited, and less well-informed players will be swiftly separated from their money. These attributes also make the market challenging to manipulate, especially during periods of extreme volume like those we are experiencing now.

Is the market often caught offside by a sudden, unexpected headline? Sure. But this many days into the war, isn’t it safe to assume that the various escalation pathways, off-ramps, and second-order consequences are already worked into the prices we see on the screen?

This line of thinking motivated us to engage in an exercise in lateral brainstorming, where we explored the following mental model: Assume the market is right and oil prices won’t explode much higher from here, even if the war drags on. What might explain this? What might we be missing?

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At approximately 10:50 p.m. on August 12, 2015, a fire broke out at the Port of Tianjin in northern China. Firefighters battled to control the blaze, but a stupendous explosion occurred some 40 minutes later. The first detonation was followed half a minute later by one of the largest industrial blasts ever recorded, generating a massive fireball with an eerie similarity to a nuclear mushroom cloud. The official death toll from the incident stands at 173. If pressed, we would take the over.

The second explosion was recorded by the many witnesses who pulled out their cell phones after the first blast. The event was thoroughly captured from various angles. For understandable reasons, numerous videos went viral online, and anybody who studied them carefully will never forget certain specifics. Watched enough times, the exclamations, expressions of shock, and panic became fingerprints that validated the authenticity of videos connected to that fateful night more than a decade ago.

Familiarity with such fingerprints came in handy over the past two weeks as we navigated social media in search of news about the war with Iran. On dozens of occasions, we observed users posting videos from the Tianjin incident as evidence of massive explosions in either Tehran or Tel Aviv. Several prominent and well-meaning accounts amplified the footage, probably because it wasn’t discernibly generated using artificial intelligence (AI) technology. It also almost certainly confirmed a preexisting bias about how these users hoped the war would go—an incredibly challenging impulse to beat back during times of major crisis.

One technique we have used to cut through disinformation and psych-ops is to navigate social media sites like Twitter/X using curated lists, segmented by political bent or point of view. To gain entry onto one of these lists, an account must regularly post interesting and relevant information, even if we wildly disagree with it. To remain on the list is simple: resist the temptation to create or propagate clearly fake information. What is the pro-renewables crowd telling itself today? The oil industry? The European elite? The Make America Great Again crew? As a tool of analysis, this approach is truly invaluable.

Another useful truth-finding method is inspecting how the same event is covered by various international outlets, especially useful during times when a single topic—like a terrorist attack or the snatching of Venezuela’s Nicolás Maduro—is dominating the global news cycle. Historically, our approach has been limited to reading English-language versions of major media periodicals in foreign countries—especially adversarial ones. Doing so provides insights missed or purposely minimized in legacy Western media.

It became obvious early on that the war with Iran would perhaps be the single most important geopolitical event in decades, especially because of the inevitable impact on energy markets. We quickly decided to fuse our two fact-finding strategies—in other words, to get a complete picture by having the Twitter/X algorithm itself help us curate a list of pro-Iranian accounts in order to examine what the other side of the conflict was telling itself about the war.

Rather than simply adding a new list to our existing profiles, which have years of bias themselves that the algorithm has already mapped, we decided to run a more controlled experiment. A new tablet was purchased, fresh email and login credentials were established, and the Twitter/X app was downloaded. An hour was then spent training the program that our only interest is the pro-Iranian aspects of the conflict.

It didn’t take long to pick up on our cues.

What followed was an experience difficult to fully articulate. As the war ramped, two wholly different universes played out online as we watched, and the ability to refresh the “For you” tabs on both sides of the conflict yielded a knowledge advantage that significantly exceeded our expectations. We take pen to paper now to share the results with our subscribers.

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Around this time last week, the war in Iran was impacting markets roughly as we suspected it would. The entire hydrocarbon complex was bid higher—including coal and, especially, liquefied natural gas (LNG)—and the spread between Brent crude and West Texas Intermediate (WTI) expanded by some 40%. Something changed mid-week, however, and as the conflict continued to escalate, that spread suddenly began to narrow. By Sunday’s wild futures opening, the two grades reached parity, but have since widened again.

Although it is hard to pinpoint precise cause and effect in chaotic markets like these, we suspect a story that broke last Wednesday had something to do with these gyrations:

“China’s government has told the country’s top oil refiners to suspend exports of diesel and gasoline as an escalating conflict in the Persian Gulf disrupts the arrival of crude from one of the world’s largest producing regions.

While the country is only the third-largest supplier of oil products into the region — its vast refining sector primarily serves domestic demand — China’s curbs just six days into a war reflect a scramble across Asia to prioritize domestic needs as the crisis in the Middle East deepens…

At a meeting earlier this week, refiners were told to stop signing new contracts and to negotiate the cancellation of already-agreed shipments, the people said. An exception was made for jet and bunker fuel held in bonded storage and supplies to Hong Kong and Macau, they added.”

China going full turtle so early is a stark reminder of our friend Sir JJ’s wise quip that oil is worthless until it gets to a refinery. Should the Strait of Hormuz remain closed for much longer, we expect that national protectionism will ultimately open up wide regional disparities in the price of gasoline, diesel, jet fuel, and other refined products. Whatever crude China gets its hands on from here—including from its massive stockpiles of emergency reserves—will be directed toward satisfying internal demand, thank you very much.

The US, on the other hand, is not only the world’s largest oil producer by a wide margin, it is also a net exporter of refined products, selling significant quantities of gasoline and diesel in international markets. (It also imports a fair bit, and you can probably guess to where and why.) Price spikes and empty refineries overseas will motivate domestic refineries to run full speed, increasing demand for WTI. Combine this with the fact that US companies also export various grades of crude and import others to optimize refinery runs, and that President Donald Trump has not yet limited exports or implemented price controls to stabilize prices for US consumers, and the drive back to parity between Brent and WTI makes sense.

Whatever the basis for the temporary Brent/WTI convergence—and others have put forward alternative explanations—oil price spikes of this magnitude usually lead to sharp economic contractions in the short term and significant long-term increases in crude supply. There is little reason to expect a different outcome now. However, China’s move does signal the likely sequence of how events will unfold in the short and medium term, making a straightforward exercise of identifying the nations that will suffer first. In a global, every-country-for-itself fragmentation of energy markets, who will feel the hurt? Let’s tour the world and assess the risks.

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Prior to the war in Ukraine, much of the European Union’s (EU) manufacturing competitiveness relied upon imports of approximately 15 billion cubic feet per day (bcf/d) of natural gas from Russia. Fast forward to 2025, and the EU has replaced much of this volume with comparatively expensive liquefied natural gas (LNG), predominantly from the US, Qatar, and Russia.

Yes, Russia. To the nearest whole number, of the roughly 14 bcf/d of LNG imported by EU countries in 2025, 2 bcf/d came from that country, accounting for about half of Russia’s total LNG exports.

Perhaps recognizing the absurdity of replacing dependence on cheap Russian fuel, in part, with expensive Russian fuel, EU leadership has been busy working to rid itself of Russian gas imports altogether, with plans to sanction the country further once the weaning is complete. This is from late January:

“Today, the 27 EU member states formally adopted the regulation on phasing out Russian imports of both pipeline gas and liquified natural gas (LNG) into the EU. The new rules also include measures on effective monitoring and diversification of energy supply…

According to the regulation, importing Russian pipeline gas and LNG into the EU will be prohibited. The ban will start to apply six weeks after the regulation enters into force. Existing contracts will have a transition period. This stepwise approach will limit the impact on prices and markets. A full ban will take effect for LNG imports from the beginning of 2027 and for pipeline gas imports from autumn 2027.”

The war against Iran, only a week old, is already shaping up to be one of the most significant geopolitical events of this generation, and the EU will by no means be excluded from its economic blast. A meaningful proportion of the world’s oil, LNG, refined fuels, fertilizer, and other critical materials is located on the wrong side of the Strait of Hormuz, which is effectively closed to shipping as of the time of this writing. Even if the Strait were to reopen tomorrow, it would not alleviate the shutdown of Qatar’s Ras Laffan natural gas export facility, one of the most consequential developments of the war thus far:

“Qatar declared force majeure on gas exports on Wednesday amid ​the US-Israeli war on Iran, with sources saying it may take at least a month to return to normal production ‌volumes.

The move means global gas markets will experience shortages for weeks even in the unlikely scenario the conflict ends today, as Qatar supplies 20% of global liquefied natural gas.

State energy giant Qatar Energy (QE), which stopped producing gas this week, will fully shut down gas liquefaction on Wednesday, two sources familiar with the matter said. They asked not to be named ​because they are not allowed to speak to the media.

QE won’t restart the facility for at least two weeks, according to initial ​estimates of the situation in the region, the sources said. Once the restart decision is taken, it will take ⁠another two weeks to turn gas into a super-chilled fuel and reach full capacity, the sources added. The company did not respond to a ​request for comment.”

Although a global tightening of LNG would negatively impact many countries, including China, Japan, South Korea, India, and Taiwan, the 27 member states of the EU look set to feel the pain most severely. With significant dependency and few substitutes, the EU is on track for a repeat of the energy crisis that began in the spring of 2021 and catalyzed the shocking deindustrialization of its major economies. Worse still, both Russian President Vladimir Putin and US President Donald Trump have signaled possible moves that would exacerbate the EU’s developing crisis, albeit for different reasons.

Will the nightmare scenario befall Brussels? Let’s explore the possibilities.

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Among the more predictable aspects of the war with Iran has been the thicket of propaganda saturating social media. Depending on what the algorithm thinks you want to believe, all manner of half-truths, exaggerations, and outright fabrications will be steadily fed to you, underpinned by the persistent mission of selling ads against your ever-decreasing attention span. The creators of what is being sent your way often have other motives, of course, chief among them shaping your opinion to fit their preferred narrative.

Yesterday, one content creator of note jumped at the chance to reset a particularly important narrative of his own. Never one short of audacity, California Governor Gavin Newsom laid bare his knack for raw opportunism when he sought to pin the long-festering gasoline crisis that is hammering his state on Trump’s fateful decision to go to war:

“Gavin Newsom sharpened his criticism on Monday of Donald Trump’s decision to strike Iran, arguing the president is pursuing a costly and open-ended war with little regard for American casualties or rising energy prices.

‘Look at your cost at the pump the last few days: That was an act of the Trump administration,’ the California governor told reporters…

‘They’re not doing a damn thing about affordability,’ Newsom said…

‘The only saving grace was gas prices,’ Newsom said, ‘and now they’re spiking up.’”

Political opportunism notwithstanding, the immediate aftermath of the outbreak of war has indeed significantly disrupted global energy markets, and much political fallout is surely just over the horizon. On Sunday, we published a preliminary set of predictions about how things were likely to unfold in the days and weeks ahead. Included among them were our views that the spread between Brent crude and West Texas Intermediate (WTI) would significantly expand, the price of liquefied natural gas (LNG) in Europe and Asia would explode higher, and international coal prices would catch a significant bid.

Two days have passed since that piece went live, and much market action has transpired. How did we do against the subsequent reality? What can we glean from the price action, and what do we expect next? Let’s do the analysis and ponder the possibilities from here.

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For a variety of reasons, most of the words that find their way to these pages are written overnight, usually between 2 and 5 a.m. The brain works remarkably well during this period. The news flow has usually ebbed. Even social media is comparatively docile, with the great majority of US-based influencers away from their keyboards on a more normal sleep schedule.

The session scheduled for Friday night into Saturday was intended for punching up a piece on the unfolding situation in Venezuela—specifically how natural gas production in the broader region, including Trinidad and Tobago, Guyana, and Suriname, might surprise on the upside. It even had a punchy title (“The Maduro Triangle”), with publication tentatively slated for Tuesday.

Alas, Mike Tyson, plans, and mouths. With the financial markets safely closed and Sunday’s opening session forever away in war terms, the opening salvos in the Middle East’s latest major conflict lit off.

Although all the signs suggested a clash was both imminent and inevitable, one could be forgiven for holding out hope for a last-second diplomatic solution that averted hostilities. That didn’t happen, and US President Donald Trump has put his presidency and legacy on the line.

Amid signs of a Strait of Hormuz shutdown, and with some insurers pulling coverage for tankers in the broader region, few doubt that energy prices will rise significantly when the futures markets open later tonight. Just how high remains to be seen, and much depends on how events unfold in the coming hours.

In times of crisis, markets do more than inform on prices, of course. They also provide valuable information about what is most likely really occurring on the ground, backed by the hard-earned money of market participants. In this way, markets can help separate signal from noise on social media, currently saturated with all manner of psych-ops, disinformation, and outright fabrications. With only hours before trading begins, what will we be watching most closely? How will the energy markets respond if the situation continues to escalate? Let’s fire up the terminal in search of answers, including a few counterintuitive ones.

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On April 24, 2013, an eight-story commercial building near Dhaka, Bangladesh, collapsed. Buried among the rubble were thousands of the world’s lowest-paid garment workers, more than 1,100 of whom ultimately perished, making the incident one of the deadliest industrial accidents on record. The scale of the carnage made headlines around the world, and shocked consumers were given rare insight into the real reasons their clothes were so affordable in the modern age.

More than enough blame was found to go around in a subsequent 400-page report: The building had been erected on a filled-in pond, undermining its foundations. Originally designed and permitted for fewer stories and light commercial use, extra floors were illegally added and stuffed with heavy machinery, huge loads of fabric, and an army of laborers. Investigators found deadly construction flaws—substandard concrete with too much sand, inadequate reinforcing steel, thinly cast slabs—all but assuring the building’s ultimate collapse.

When the building lost power on that fateful day, a regular occurrence in the developing country, large rooftop diesel generators switched on, sending strong vibrations through the already compromised structure. The failure of a critical column near those generators triggered a cascading series of floor collapses, the combined weight of each overwhelming those below with shocking speed.

Clothing articles found among the debris bearing dozens of household brands named and shamed those ultimately responsible for the catastrophe, including many famous French designers.

There is a direct line between this tragedy and the duty of vigilance law (DVL) passed in France in 2017, which requires large French companies to establish, publish, and implement plans to identify and prevent serious human-rights, health and safety, and environmental risks in their operations and supply chains. Critically, the law extends big-company responsibility to subsidiaries, subcontractors, and suppliers, with potential civil liability if they fail to meet those obligations. The law is a clear precursor for the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD).

Unlike the CSDDD, which specifically calls out the need for large companies to address climate change in their risk-management documents, the French DVL is comparatively silent on the issue. Do “environmental risks” include accelerating climate change? If so, what practical steps are large French companies supposed to take? Critics have described the DVL as impractically vague in general, and a wide variance in corporate efforts to avoid running afoul of the legislation has frustrated practically all the stakeholders involved.

This very vagueness is now on trial in a Paris courtroom. After years of legal wrangling, one of the most important climate lawfare cases is finally reaching its apex:

“In the city where the Paris climate agreement was created, French oil major TotalEnergies is facing trial in a landmark civil climate case that aims to compel the company to curb its oil and gas production and emissions in line with the global accord’s 1.5 degrees Celsius long-term temperature limit.

The Paris Judicial Court is holding a hearing on the merits, essentially a trial, Thursday and Friday in the case brought by French nonprofit groups and France’s capital city. Judges are examining, for the first time in the country’s history, whether a multinational oil and gas company can be legally required to reduce its fossil fuel production in line with climate objectives, according to a press release from the plaintiffs.”

The stakes involved could not be higher. Among the core issues: the extent to which national climate commitments can be forced upon companies domiciled in those nations, the lengths to which courts can order multinational companies to go in order to meet those commitments, and even France’s future as a significant player in the world of hydrocarbon development. Let’s hop on a plane, cross the Atlantic, and check in on the most important court case you’ve probably never heard of.

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Early in the afternoon on March 24, 2021, some 200 fighters of the Al-Shabaab/Ansar al-Sunnah insurgency, a group aligned with Islamic State Mozambique, descended on Palma, a town in northern Mozambique’s Cabo Delgado province. Over the course of 12 days, more than 1,000 innocent civilians were ruthlessly slaughtered. We’ll spare the reader the gruesome details, but the dead included dozens of contractors supporting TotalEnergies’ nearby liquefied natural gas (LNG) construction project on the Afungi peninsula.

Conceived in 2010, the Mozambique LNG development is a case study in the difficulties of executing multi-billion-dollar energy projects in politically unstable parts of the world. TotalEnergies became the initiative’s operator only in 2019, after it partnered with Occidental to acquire Anadarko’s African assets. Less than two years later, it was forced to declare force majeure on the project, which is not anticipated to reach completion until 2029.

In stark contrast with this onshore LNG odyssey, the Italian major Eni’s floating LNG (FLNG) project, some 50 miles off of Mozambique’s shore, has proven a model of efficiency. Proposed in 2016, the Coral-Sul FLNG produced its first cargo in 2022, and today it liquefies approximately 0.5 billion cubic feet per day (bcf/d) of natural gas for sale in international markets. The vast and deep waters of the Indian Ocean provide an unparalleled security buffer against Islamic terrorism, as the marine-based capabilities of such groups are extremely limited. When its anticipated 25-year run is complete, the giant gas-plant-on-a-ship can be towed to a new location just about anywhere in the world and begin producing again.

As described in this expansive article published in the Financial Times on February 14, the concept of floating LNG production facilities has long been a goal of the oil and gas industry, but early challenges set the concept back for years and fed skepticism that it would ever make economic sense. Eni’s remarkable success in Mozambique, on the heels of similar projects in Malaysia, Cameroon, and Australia, makes clear that FLNG technology is ready for prime time, and a wave of new vessels is under construction. Among the high-profile plans is an Eni-led initiative to rapidly unlock natural gas production in Argentina’s massive Vaca Muerta shale deposit:

“Eni, YPF and XRG, the foundational project partners, today announced they have signed a binding Joint Development Agreement (JDA) to advance Argentina LNG. This large-scale integrated gas and liquefaction project will unlock Argentina’s Vaca Muerta shale basin and help position the country as a long-term global LNG supplier.

Argentina LNG is expected to deliver 12 million tons per annum (mtpa) [1.6 bcf/d] of LNG capacity, via two floating LNG facilities with a capacity of 6 mtpa [0.8 bcf/d] each. The project is designed to include production, processing, transportation, and LNG export infrastructure.”

The project comes on the heels of Golar LNG’s decision to redeploy its Hilli Episeyo FLNG vessel from Cameroon to Argentina, where it is anticipated to begin production in late 2027.

The mainstreaming of FLNG technology represents a major development in hydrocarbon extraction technology—one that vastly expands resource viability worldwide and even pushes the phony concept of peak cheap oil further into the distant future than it already was, not that it was ever really on the horizon. If one plays forward the pace of development by a decade, the potential for change in global molecular flows is substantial. Let’s indulge in some informed speculation and ponder the consequences before they become common knowledge.

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