Now, on to the roiling markets…

As faithful readers know, Dan Yergin—the Pulitzer Prize–winning author, guru of the oil markets, and vice chairman of S&P Global—comes round my place in Nantucket each summer for a sit-down to discuss the global energy outlook. Today, however, I am fortunate to have Dan here a few months early, for obvious reasons: The Mad King has launched his war of choice against Iran, and it’s roiling the oil markets; the military action in the region has all but closed the Strait of Hormuz.

On Monday, Trump said the war was “very complete” and that oil companies should “show some guts” and send loaded ships through the strait. The insurance companies that underwrite these massive tankers often feel quite differently—after Trump spoke, however, the price of a barrel of oil dropped to around $90, following an intraday spike to nearly $120. On Tuesday the price fell further, back to around $80 a barrel, and then rose again. (Predictably enough, an options trader emailed me on Monday night about the prescience of investors who, right before Trump spoke, had bet that the price of a barrel of oil would fall, and made millions.) Regardless, the price of a barrel of oil is still up 50 percent since the beginning of the year—the direct result of Trump’s military buildup in the region starting in January.

In my conversation with Dan, he pointed out that Monday’s spike represented a 100 percent increase over the $60-a-barrel range where oil had been trading at the end of 2025. It’s been great for Trump’s oil buddies, but not so for American consumers, who are seeing dramatic price increases at the gas pump. That could be why, with the midterms on the horizon, Trump is now framing the Iran conflict as a “short-term excursion”—in other words, to borrow the parlance of his detractors, this may just be another TACO moment.

Dan told me that the biggest economic impact of the president’s “excursion,” aside from in Iran itself, has been felt in Asia. After all, he noted, 80 percent of the oil that originates in the Gulf, and 90 percent of its liquefied natural gas, goes to Asia. “We’re already seeing cargoes of L.N.G. that were going to go to Europe being diverted to Asia,” he said. Meanwhile, in Europe this week, the member countries of the International Energy Agency approved the release of some 400 million barrels from its strategic reserves to offset supply disruptions. The U.S., for its part, is actually a net exporter of oil.

But the global impacts all depend on the timetable. “If this is resolved in the next several weeks, prices will go down,” Dan said. “Supplies would start flowing again. And you’ll see a huge sigh of relief in global markets.” However, he added, “If this goes on for another three weeks, then the repercussions become much more serious. It’s in the interests of the U.S. and oil consumers around the world to get this over with and resolved, and to get the strait opened up.”

Unlike politics, it’s hard to manipulate the laws of supply and demand. Millions of commodities traders vote with their dollars, nearly 24 hours a day. And when there’s a dislocation in the markets, such as the one we’re experiencing now, price acts as both a regulator and a forward-looking indicator. “People start bidding up the price of barrels and B.T.U.s of natural gas,” Dan said. “That’s what’s happening now.”

As the war rages on through its second week, the economy is starting to feel the second-order effects of Trump’s attack—specifically, the prospect of oil companies running out of storage in the region and shutting down production facilities, since the oil currently on ships can’t be delivered. “Once that’s shut off, it will take longer to bring production back,” Dan said. On the bright side, he noted how much worse this would’ve been a decade or so ago, before the shale revolution made the U.S. a net exporter of oil and somewhat self-sufficient.

But there will still be repercussions for American consumers. “We actually export oil that we can’t easily refine and import oil that fits our refineries better,” he said. So, of course, we’re affected by price fluctuations not only at the pump, but also on store shelves, where oil and oil-derived ingredients end up in countless products. “At the end of the day, it’s one global market,” Dan reminded me. “Prices in one part of the world inevitably affect prices in the other part of the world.”

The war’s long-term effects will come down to two factors, he explained: how long it lasts, and how much damage is done to energy infrastructure along the way. “Trump began by saying ‘four weeks’ several times, which presumably is what the military planners told him,” Dan said. “But the message is unclear, and there’s no sign that Iran is going to cease resisting.”

I asked Dan how he’s handicapping the likelihood of Iran acquiescing to Trump’s demand for unconditional surrender. “This is existential for the Iranian government,” he said. “It’s who they are. It’s the ideology of the Iranian Revolution, and martyrdom is part of their ideology. If you think about what’s happening now, it’s really [part of] the second revolution that occurred. The first was the overthrow of the shah; the second was the seizing of power by the Islamists a year later, and since then, they’ve defined their whole regime, their raison d’être, by a hatred for and opposition to the U.S. Their slogan has been ‘Death to America.’ So you can say this war has really been brewing for 50 years.”

After our chat, I took another look at Dan’s recent Financial Times opinion piece outlining the possible consequences of Trump’s war. He wrote: “One legacy of all this has been the nightmare scenario of the oil that flows through the Gulf being interdicted by an extended and destructive war,” he wrote. “The fear? That this will result in skyrocketing energy prices that send the world economy plummeting into a deep recession.”

Well, as my faithful readers know, we’re long overdue for a correction in the markets. The last major financial crisis was in 2008, and these things tend to happen once every 20 years or so. It shouldn’t come as a surprise that we may be getting close to an exceptional event that once again resets Wall Street’s risk appetites, which have obviously surged to unsustainable levels. For a time, we wondered whether the catalyst would come from the emerging problems in the private-credit market, or perhaps a backlash to the frothy A.I. hyperscaling economy. But the truth is that the Franz Ferdinand moment is often a surprise—the incident one least suspects. Could the catalyst come instead from Trump’s potentially misbegotten military adventure in Iran?

That’s the thing about an impending financial crisis. No one rings a bell at the top of the market, and no one who’s being honest knows what will kick off a tailspin. But there’s no mistaking when one has arrived.

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