Recent news is that a contingent of ground forces have arrived in Iran. The markets still seem expect that Trump will chicken out (which seems likely) and that things will return to normal in the Gulf (which seems very, very unlikely).
My most hopeful guess at this point:
- Trump chickens out, declares victory, says we have a deal with Iran, and pulls out.
- Europe and Asia make a deal with Iran that conditionally opens the Strait, with Iran deciding who can transit, and collecting large tolls.
- Europe and Asia start getting deliveries of oil and gas and fertilizer and helium. Because of the gap already embedded in deliveries, prices spike up in the meantime.
- Because the U.S. is an oil and gas exporter, our prices spike up less (but still spike up, because there’s a global market), and reduced supply of fertilizer and other things from the Gulf means other prices spike up as well, producing an inflationary recession that rivals the worst of 2008 and 2020.
All my other guesses are similar, except that my scenario is preceded by a step 0 in which a bunch of U.S. soldiers and marines are killed while failing to reopen the Strait.
