This post is opinion only. See full disclaimer below.
I have written about many of these points in earlier posts, but let’s consider anew here briefly just two key issues for the markets at present. Each of these areas are based in part ultimately on political power. I have argued for a long time now, and my Macro-political Captured Assets Hypothesis emphasizes this fact, that such power calculations are fundamental for understanding market valuations. As always, this is not a stock picker site. Rather, in Weberian form, I am simply giving you categories to reflect on, my broad general view which can, of course, be mistaken, and it is obviously up to you to consider the counterfactuals fully and make your own determinations.
First question: is the US after regime change in Iran or not? If the answer is no, then Trump will not order a new round of strikes, but only try to simply get a new nuclear deal at the bargaining table. Nothing says that that will be easy to do. The Iranian regime has grown accustomed to US regimes not acting and willing to negotiate over long periods. It is true Trump attacked their nuclear sites, but that was a specific limited action not an effort at regime change. Perhaps, he will not as the Iranian regime seems to believe risk a spike in oil prices from a Middle East war. That is, of course, quite possible. If no deal is forthcoming though, the likelihood of military action goes up significantly including at least a direct attack on Iran’s Pickaxe Mountain nuclear site. There is, however, no reason to believe that Trump is interested in simply maintaining the status quo ante.
The problem, however, the strong counterfactual to simply an endless negotiated deal-making, is that a lot of the signals are suggesting regime change is in fact in play from the outset. Trump this past week even said this directly noting that regime change would solve a lot of problems and be a good idea in his view:
| Signal type | What’s been happening | What it usually implies |
| Sanctions on oil & finance | Tightening sanctions on Iran’s oil networks, front companies, and shippingfacilitators, explicitly to cut off funding for the military and IRGC. | Not just deterrence—this is about weakening the regime’s core capacity. |
| Broad Iran sanctions framework | Congress and the administration using sanctions as a central tool to constrain Iran’s behavior across nuclear, missile, terrorism, and regional activity. | Long‑term structural pressure, not a one‑off. |
| IRGC focus | Continued emphasis on IRGC and terrorism‑related sanctions, with IRGC still designated as a foreign terrorist organization. | Targeting the regime’s power base, not just peripheral actors. |
| Military posture & rhetoric | Carrier group (USS Abraham Lincoln) offshore Iran, Trump saying “we’re watching Iran” and earlier hinting at “coming to their rescue” re: protesters. Threatening and preparing for military action. | Mix of coercive signaling and political framing of the regime as illegitimate. |
Put together these signals suggests Trump may indeed be after regime change as the main policy goal. If the talks in Oman break down and Iran is unwilling to make major concessions in the very least ending uranium enrichment, if not also concessions on missiles, US action may indeed be coming sooner rather than later. But even in the unlikely event of no action now, future action suggests a continued US intention to use economic sanctions and other means to ultimately create the conditions for regime change.
Now what does that power calculation mean for markets? The key for markets is that if regime change really is the telos of US foreign policy here it also fundamentally changes the likely response of Iran.
How that changes the scenario tree: If you assume regime change is the effective strategy, even if not openly declared:
- Iran’s perception of existential threat rises. They see sanctions, military pressure, and political delegitimization as part of one campaign.
- More extreme tools move up the ladder:
- Attacks on Gulf oil infrastructure: from “likely in major escalation” → “very likely if strikes occur.”
- Strait of Hormuz disruption: from “harassment and episodic disruption” → “serious risk of functional closure if Iran believes the regime itself is targeted.”
- Full multi‑front proxy activation: Hezbollah, Iraqi militias, Houthis, etc.
- Iran has already said that if attacked, they will use all these means in response.
- Iran’s incentive to “take the world hostage via oil” increases, if they believe the endgame is their removal, not just behavior change.
There is no guarantee this is going to occur at all, and counterfactuals need to be weighed heavily. But just to continue the logic this would mean:
- The U.S.–Iran conflict is not going away and may be on the verge of a major strategic escalation. Sanctions, military posturing, and proxy conflict are now baked into the system along with possible military action.
- The probability of recurrent supply shocks is higher. Not just one event, but a series of flare‑ups over years—attacks, disruptions, cyber incidents, even if war is delayed here, which seems increasingly less likely. Or of a major conflict.
- The floor under geopolitical risk premium is higher. Even in “quiet” periods, the market knows the powder keg is still there although this is definitely not a quiet period.
- Major events are on the table that the markets are not taking from a probabilistic standpoint seriously enough and the likely valuations for many assets especially oil..
It’s closer to: “The structure of U.S.–Iran policy plus Iran’s response options creates a persistently fragile supply system in oil subject to a sudden, quick, major disruption.”
Second key question to ponder: Are we going into a Commodity Super-Cycle?
As a result of key changes in the global system are we going into an unprecedented period of US economic expansion that leads to a spike in commodities?
The counterfactual here is that Trump most certainly does not want an inflationary spiral caused by a commodity boom. That’s not to be taken lightly. The conceptual issue is whether you can so to speak have your cake and eat it too. If your policies lead the US to China like levels of 5 or even 6 per cent GDP growth as Bessent and Lutnick have suggested is coming it’s going to be very hard to keep commodity prices controlled.
Running the economy super-hot like this would lead clearly in this direction especially if the US enters a new rate cutting Fed period. Dollar lower, commodities higher as they say, dollar lower emerging market commodity exporters higher also. The markets were starting to price this in, and commodities not just gold and silver were spiking. We are from a historical perspective at least in the earlier accumulation phase of such a potential cycle at least for the broader commodity markets if not the precious metals which react also to other factors. In this period, which could even last the remainder of the year if prolonged; expect high volatility as big money moves into its positions and plays with retail while doing so. The major escalation in prices of commodity producers as opposed to simply rising commodities could even wait a while as it often does (or not!).
The selection of Warsh as the new Fed chair—an Austrian economic school, perhaps more dollar hawk—put a temporary damper on what seemed to be a rotation to value commodity stocks. But Warsh is extremely politically savvy as shown by his earlier tenure at the Fed during the rough period after the housing bubble ended. He is not likely to want the Fed to get in the way of economic expansion, but to instead take a back seat to the economy and get out of the way. This is a complex issue, and I don’t have time here to get to all the specific policy issues of withdrawing excess liquidity, or if its possible to increase the supply side of the equation to meet increased demand, etc. The deeper question is does this change the overall macro picture or not of a longer term commodity super cycle in which commodity demand increases very significantly?
Here also, there are two additional MCAH style questions to ask regarding the commodity super cycle question:
What is the full significance of the AI-driven energy demand expansion?
This is the sleeper macro theme almost everyone is underpricing.
AI → data centers → massive electricity demand → natural gas + oil liquids demand → higher baseline energy consumption. This also includes necessary broader commodities needed in this build out. Obviously the markets are aware of this, but are they pricing it correctly given these longer term trends?
Data centers are already:
- outgrowing grid capacity
- forcing utilities to expand fossil generation
- driving long-term load forecasts higher
AI is not “green.” It’s petroleum energy‑intensive as I argued from very early on in this process.
Another key MCAH aspect of this second question is the political and cultural shift away from the climate-change‑first narrative.
This is subtle but powerful:
From a macro-political perspective you are seeing a fundamental shift from the climate change narrative of the last 30 years to a new more energy expansive perspective. I have written about this in earlier higher level analytical posts. If you haven’t reviewed these. you might want to here.
But in terms of the current MCAH moment, the following is occurring:
- reduced political appetite for aggressive decarbonization
- more acceptance of fossil fuels as “necessary”
- regulatory softening
- capital flowing back into energy
- ESG losing dominance
Does the new real-politique global order emerging mean that at least as long as the current regime in the US is in power there will be a scramble by each power bloc to secure as many commodities as possible. The current tiff over Greenland needs to be understood in these terms.
In any case, you might consider the following hypothesis and try to disprove it:
“We’re entering a multi‑year commodity super‑cycle including for oil driven by long term underinvestment, rising demand from AI and global growth, geopolitical fragmentation, a retreat by elites from the climate change narrative, and political shifts that favor the traditional value commodity sector.”
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