Transcription
As events started erupting last night, the irony was impossible to miss. Trump had just posted that the supposed collapse in negotiations was fake news. And then almost immediately, the situation lurched into a sharper exchange between Iran and US aligned forces. It built into what looked very much like Iran battering naval assets and striking or at least affecting Kuwaiti International Airports and likely other targets as well.
What makes this truly significant is that it does not look like a minor interruption. It looks like a ceasefire arrangement that was never solid to begin with and may already be coming apart. At this point, the real answer rests with Donald Trump because he is the one sitting there with the US Navy nearby trying to decide what comes next.
Yet, the people in New York, especially in finance, are acting as if the conflict has effectively ended. Analysts this morning were talking as though the odds of any further escalation were below 1%. That belief is written all over the market. Stocks are up. Oil has eased somewhat. I do not buy that assessment for a second. My own judgment is far less optimistic and I was not surprised by what happened. We hit that tanker with some connection to us, an African vessel, I think, and they answered. And then we answered again. That is not the behavior of a war that has concluded.
The deeper reality here is that Trump looks like a man trapped alone in a pitch black room groping for an exit he cannot locate. He wants out badly and that frustration is becoming visible. But simply walking away and declaring the matter finished is not really available to him because in the final analysis Netanyahu holds the decisive hand. If Netanyahu rejects something, Trump ends up moving with him anyway. I see no sign that this relationship has fundamentally changed. All the public insults and outbursts may be real enough, but they are not especially meaningful. At the end of the day, Israel will pursue what it wants and everyone else can be damned. That is how they see it. Their vision remains greater Israel and the expectation is that others, especially us, will support the project and keep Iran occupied while Israel finishes what it wants in Lebanon, Gaza, and perhaps elsewhere. That must be taken seriously. Trump may be exasperated by all of it, but his room to maneuver is limited.
Right now, what he wants most is to calm markets and preserve the appearance of stability. That is why we keep hearing that talks are still alive and discussions are ongoing. But where is the evidence? Where are these meetings? Where are the actual negotiations? From everything I can tell, there is no meaningful direct dialogue taking place. Messages may be passing indirectly through Pakistanis and through other channels, but that is not the same as negotiations.
And here is the critical point. From the Iranian perspective, they now hold the commanding position. They control the straight, full stop. They are not giving that up. And with the weapons available to them, who exactly is going to force them out? This is not a scenario where you land 10,000 Marines and solve the problem. That would simply create 10,000 targets. People have surely explained this to Trump, and it only deepens his frustration. So, we are in a stalemate, yes, but not an ending. My instinct says that at some point, out of sheer anger, he may decide to take one more shot and try to bomb Iran into submission. The evidence pointing in that direction is not hard to find. One of Iran's central conditions has been a complete halt to hostilities in Lebanon. Yet, we woke up to reports that Beirut had been hit again.
I never believed that supposed dressing down Trump gave Netanyahu would matter much, even if it happened exactly as reported. And if Trump did publicly throw his weight around, only to see Israel do what it did last night, then the whole thing becomes an issue of face-saving. Israel struck Beirut and then issued new evacuation orders, effectively pushing people north of the Zahrani River, roughly 40 km or 25 mi from the border. That covers around 14% of Lebanese territory. Nobody is talking about this enough, but that is a major provocation in its own right. It is an escalation, not a de-escalation, and it plays directly into Iranian calculations because Tehran appears deeply committed to resolving that part of the equation.
Iran, meanwhile, is enjoying a kind of celebrity status across the Muslim world because it is the one Muslim state that said, "No." It has openly taken up the cause of defending Gaza and Southern Lebanon. Its position is straightforward. As long as Israel continues attacking Muslims in those places, Iran will stand with them and retaliate against Israel. That alone is one more reason I believe this war is likely to reignite.
But, there is more happening here than the Israeli angle, important as that is. People were astonished by how hard Kuwait was hit. But Kuwait is also another artifact of the British Imperial order. Across the region, there is immense resentment toward these small statelets whose existence in the eyes of many rests largely on the Sykes-Picot legacy. Frankly, there are many in the region who want that entire arrangement swept away along with Israel. So, the fact that Kuwait took a severe blow should not surprise anyone. In fact, I think all of those Emirates strung along the western coast of the Persian Gulf are living on borrowed time. Eventually, many of them will disappear and not return. That too aligns with broader Iranian ambitions, and I see no indication whatsoever that Tehran intends to back off from that objective.
So, yes, the Israeli issue remains the first layer of the crisis, and Iran will keep responding to it. But every Iranian response increases the pressure on Washington to join Israel more directly against Tehran. That is why I do not see a clear path out. I see no evidence at all that Netanyahu is suddenly going to say the greater Israel project is on hold for a decade. Quite the opposite. So, how does one avoid sliding back into full war? I do not see how. We are being drawn toward it. What that ultimately produces is still unclear. But with high-end conventional warfare operating as it now does, I do not see how such a conflict pushes Iran out of control of the Gulf. That is the center of gravity right now.
And the rest of the world is watching in amazement. They look at Iran and say, "These people stood up to the US Navy and the US Air Force without having a real Air Force or a real Navy of their own." Trump can keep saying he sank their navy and that there was not much there, but that misses the point. They still have men in fast boats darting in and out capable of causing havoc. And every time you get near them, you are exposed to cruise missiles, tactical ballistic missiles, drones, and whatever else they decide to use.
What most people fail to understand is how this is being received across the wider Muslim world. Many are saying, "Look what Iran has managed to accomplish." As that admiration grows, something else is forming on the opposite side of the Gulf. The beginnings of a Sunni Muslim alignment. Sunni Arab states, Egypt, Saudi Arabia, and even Pakistan, though not Arab, certainly Sunni Muslim, are increasingly converging quietly against both the United States and Israel. That is why Trump's effort to get regional leaders to sign on to the Abraham Accords was met with near total silence. That initiative is finished. It has no realistic chance now. They have not yet fully coalesced with Iran, but the longer this continues, the more likely that becomes. Greater unity is the probable direction.
And then there is Turkey, the true heavyweight in the room, the 500 or 600-lb gorilla sitting in the corner. Turkey is deeply unhappy for a whole range of reasons. Historically, the Turks saw themselves as leaders of the Sunni Muslim world. And now they are forced to watch Shiite Iran become the celebrated power at the center of events. There is much more unfolding here than most people are willing to acknowledge.
The Turkish question matters for another reason as well. If Trump keeps sending angry messages to NATO, repositioning forces, and openly displaying his displeasure, that could accelerate Turkey's eventual departure from the alliance. The truth is, Turkey has been more of a paper member of NATO than a fully integrated one for a long time. Turkish interests do not genuinely align with European interests. Europe has never wanted Turkey inside the EU, and Europe's internal tensions over Muslims and over non-Europeans more broadly are enormous and worsening. So, yes, I would expect Turkey eventually to drift away entirely. That break may not come with some dramatic formal declaration. It could simply dissolve. NATO and the EU may not end with a bang. They may just fade into irrelevance and disappear. Frankly, I think they are already well down that road. Even now, they struggle to matter in any coherent sense. The Chinese look at the EU and shake their heads because Europe cannot organize itself or produce a common strategic position. Serious economic cooperation with such an entity becomes absurd.
As time passes, we are going to see more of that dysfunction. Europe has entered a phase where it must rediscover what it is, what it wants, and what role it intends to play. For Turkey, that means acting increasingly on its own. There is no real doubt about that. Its future, as Ankara sees it, lies with fellow Muslim societies in the Middle East, North Africa, and to some extent Central Asia. Yet, Central Asia is more complicated because most of those republics remain relatively comfortable with Russia. That limits Turkish room to establish dominance there, even if it desires it.
For us, the pressing issue is increasingly economic and financial. How long can we sit in the Sea of Oman doing effectively nothing while burning money at an astonishing rate? And how long before access to the Red Sea becomes blocked as well? Is that not practically on the agenda already? I do not have a firm answer, but the burden is heavy. Maintaining all those forces is enormously expensive. Perhaps as long as the Central Bank can keep printing, people assume it does not matter. But how much longer can that illusion hold? Look at London. Their gilt yields are around 5% and Britain looks dangerously close to a financial economic breakdown. They are perhaps four to six months ahead of us on the same road, and we are trying to prop them up quietly in the background. But how far can that go? How much support can we realistically provide? Not much in my view, because we are traveling the same path.
And this is the critical point. How do you stop interest rates from climbing in this environment? Inflation is rising and some are projecting 6% by the end of the summer. In the short run, the political message from Trump and his circle is obvious. The war is ending. Things are improving. We are talking to the Iranians. Calm down. Do not believe it. That narrative is designed to steady markets and keep panic contained. Over the long term, I do not think it will hold.
In the short term, however, Wall Street clearly believes the performance. That probably reflects the fact that so many people around Trump come straight out of Wall Street. But that does not make the story true. The same overconfidence shows up in market valuations. There are already comparisons being made to 1929 with valuations even above the dot-com bubble and much of that appears tied to AI mania, overinvestment, circular investment, and speculation feeding on itself. Add to that reports about diesel deliveries into the United States being inflated to absurd levels and the question becomes whether fuel prices can really be brought down domestically before the midterms.
My answer is that it depends on several variables beginning with the fact that the effects of this war with Iran are only just starting to register. How severe they become depends heavily on whether the war expands or halts. Right now, there does not seem to be a genuine plan to stop it and we have this so-called blockade which I am not even sure I understand. I do not know precisely what it is achieving. Russian, Indian, and Japanese tankers have still exited the Gulf which tells us oil is moving outward. The Iranians are selling it. We know that much. They can also move oil across Iran toward the Caspian. So, not everything has to flow through the Persian Gulf.
Even so, a great deal depends on whether the Gulf is truly open. Iran has said it can be open but only under Iranian authority working alongside Oman. In other words, they intend to control the Gulf. We are not going to accept that and from our standpoint, it is fatal to any durable long-term agreement. So, when people ask what the real effects will be, my answer is that we have barely begun to feel them. Broadly speaking, I think we are going to have one hell of a time keeping prices down. They are more likely to rise.
There is also this issue of so-called shadow oil. Unaccounted for barrels floating through the system. How many are there? Where are they? Are they still moving? I do not know, but apparently they do have an impact. I cannot tell you how many millions of barrels that involves. Still, in the larger picture, I would say we are in serious trouble. Dire straits, if you will.
From there, another major front demands attention, Russia and Ukraine. In the United States, that war has fallen badly out of the news cycle. Yet on the ground, it appears to be intensifying. Around places like Kostantinovka and even Zaporizhzhia, there are signs of formations that suggest something more significant may be developing. Tactically, yes, those battlefield changes are occurring. What is harder to determine is the larger strategic purpose and operational focus behind them. But on the tactical level, the Russians have solved most of the problems that previously constrained them. They are now overwhelmingly in control of the battle space. They are dominating it. So, the real question is no longer whether they can act, but what they want to do next.
If you were sitting in the Kremlin and looking at the map, you would see a huge mass of Russian military power in southeastern Ukraine. You would also see another very large concentration farther north and west, effectively astride the avenue of approach to Kyiv. Then there is a third concentration in Belarus, north of Kyiv, and I am told that grouping includes somewhere between 20,000 and 30,000 North Korean troops as well. With those force concentrations, Russia could, if it chose, act simultaneously or near simultaneously, or do it sequentially. It could cross the river near Zaporizhzhia, use the bridge there, move on Odessa, push south and seize it. That is the logical way to do it. You would not waste time trying to storm Odessa from the Black Sea. That approach creates too many risks in this, accidents, unnecessary complications.
The other major question is Kyiv itself. When you strip away appearances, what are you really dealing with there? Someone said yesterday that Ukraine is dead and simply has not been informed of the fact yet. That is a harsh line, but not an inaccurate one. The Ukrainian state as such is barely functioning. I would not even describe it as being on life support. What is being kept alive is an enormous organized criminal network spread across the country, siphoning off roughly half the money that comes in and reselling perhaps half the equipment it receives. How do you terminate that system? In the end, the only way is to cross the river and enter the city. I think that possibility is being seriously considered. The forces exist for such operations, not only around Kyiv, but in the south as well, including for a move on Odessa.
From the outset, Putin strongly hinted that Kharkov and Odessa, historically Russian and Russian speaking, would again be Russian. And we should not forget what happened in Odessa in 2014, when Russians were driven into buildings and burned alive by Ukrainian nationalists. That is not a crime Moscow is simply going to ignore forever. There will be a reckoning. The real question is timing. Weather matters enormously. If you are going to do this, the best time is now. Move immediately. Do not wait. Once you get to late August or early September, the weather shifts and the window for mobility and maneuver narrows dramatically. That is why I suspect Russian commanders are now telling Putin they are prepared. They have the equipment. They have the logistics, supplies, ammunition, railheads, even additional rail infrastructure have been methodically positioned to support exactly the kind of operations I have described. The Russians have been extraordinarily deliberate. That preparation is not accidental.
At the same time, Ukraine's long-range strikes keep happening and that is deeply frustrating. Those attacks would not be possible without our help, meaning the United States, Britain, or France.