Bomb’s Drop. Oil Pops.

I was young and brash and stupid, and I thought it was funny. So, I bought it… and I wore it.

On an eighth-grade field trip to New Orleans, I saw a yellow T-shirt in a tourist shop sporting an image of Mickey Mouse aggressively holding up his middle finger. Below Mickey were the words, “Hey, Iran…”

This was the spring of 1980, amid the heat of the Iran Hostage crisis.

Thing is, my “girlfriend” in eighth grade was Persian, i.e., Iranian. And her very angry Persian dad had seen a picture of me wearing that shirt on Bourbon Street.

Things did not go well…

Like that shirt, I suspect the bombing of Iran is not going to play so well, either.

Let’s start with the obvious that is playing out already: oil.

Iran has long threatened to close the Strait of Hormuz, a narrow but strategically crucial passage of water separating Iran and Oman, and through which flows as much as 30% of the world’s daily oil consumption. In the wake of America’s bombing of Iran and killing of Ayatollah Khamenei, the country’s supreme leader, Iran immediately attacked an oil tanker in the Strait.

Global shipping companies, as well as maritime insurers instantly halted all tanker transit through the Strait, effectively closing one of the most crucial pathways by which the world quenches its daily thirst for oil.

And, at the time of writing, oil prices jumped 7% on the news.

Question is: Where do we go from here?

Iran has a history of rattling cages but then doing nothing. So, there is an argument to be made—small as it is—that Iran might just do nothing more, replace its leadership, and move on.

More likely, however, is a war of attrition that drags on, much like all the wars the US involves itself with in the Middle East.

US/Israeli superiority in the skies above Iran won’t topple the regime—air dominance rarely, if ever accomplishes that. Iran will look to survive rather than win, and it will rely on asymmetrical warfare—like attacking oil tankers in the Strait of Hormuz or in the Persian Gulf.

Trump, I have to imagine, is loath to plant American boots on Iranian soil, as Baby Bush did with Iraq and Afghanistan.

Congress is even more loath to do so, given that even members of Trump’s own party are outwardly revolting against his actions in Iran.

That’s probably the most likely scenario going forward… a war that grinds on for a while. (If we do get a boots-on-the-ground war, then all bets are off because the situation will devolve rapidly at home and abroad).

Maybe Congress votes against Trump and forces him to retreat. But even then, you can’t put the hornets back into the nest and pretend you didn’t kick it.

Iranian leadership remains broadly intact. And undoubtedly, whilst some portion of its citizenry celebrated the death of Khamenei, another portion is livid and likely hopes for revenge. And at some level, Iran will be successful; that’s just the nature of asymmetrical warfare. Surprise attacks work.

Which means oil prices will remain under pressure.

Oil markets have always functioned with the idea that an aggrieved Iran might close the Strait of Hormuz, but that was a back-of-mind worry for the most part because, aside from a few showy skirmishes in the past, Iran has never really made any concerted effort to actually shut down the Strait.

Now, however, that risk is top of mind.

Even if the US pulls back, Iran could very well attack tankers in the Strait with such regularity that the insurers will simply stop writing coverage for any tankers transiting the Strait… which would effectively shut in all the oil that passes through the Strait every day.

Simply put? Oil prices rise… which means inflation in the US rises as higher energy prices translate into sticker shock at the gas pump, for home heating oil, and for myriad other products that rely on petroleum as an input.

Many folks think that because the US is the world’s largest producer of oil that America doesn’t face energy price worries. That’s inaccurate because oil is a global commodity. If demand for oil globally means that a barrel of crude is worth, say, $120 on the world market, there’s no way US oil producers are going to sell that barrel for, say, $75 in the US.

If the next barrel of oil the world needs sells at $120, then all barrels of oil sell at $120 (give or take, based on regional variations and oil quality).

This is one of the reasons I always want oil exposure in my investment portfolio, and why I’ve had that exposure for years and years.

Oil is a crisis asset and, aside from water, oxygen, and food, the most important commodity on the planet. Without oil, we’re back living in the pre-industrial early 1800s.

I own oil stocks because demand for oil isn’t going away in my lifetime, yet the hunt for new reserves is dwindling for a variety of reasons. Rising demand and the world’s questionable ability to meet that demand at some point in the near future means oil prices rush violently higher. 

And there’s always the risk that something like what we’re seeing now in the Middle East unleashes unintended consequences.

Imagine a vast regional war that destroys oil fields, blows up major pipelines in Saudi Arabia, and shuts down the Strait of Hormuz… none of that is out of the question in a technological age of drones and hacking.

Oil prices would race to historically high levels—well above $150 for sure.

In the most recent issue of Global Intelligence Letter I recommended readers grab two energy plays. It was fortuitous timing to be sure, since I did not have “War with Iran” on my 2026 bingo card.

But fortuitous timing is a lot like that saying about luck being a mixture of preparation and opportunity. Or said another way: right time, right place, right asset… and you’re rich!

That’s the energy market.

You own high-quality energy stocks—small explorers, giant refiners, pipelines, LNG processors—because the world is a volatile place, and it cannot survive in its present form without oil and natural gas.