My variant perception of the oil market today can be best described by the following:
The geopolitical landscape is binary: either the IRGC controls the Strait of Hormuz, or it doesn’t.
Oil markets have yet to price in this binary outcome because oil analysts are still assuming some path to normal.
Governments around the world have not yet come to accept this harsh reality, thinking that SPR can weather this “short-term” event, when the reality is far from short-term.
Before I continue, I need to set the record straight. I am not a geopolitical expert. I hate geopolitics because it’s never black-and-white. I was also a non-believer that Iran can or will close the Strait of Hormuz. I wrote articles in both 2024 and 2025 explaining why the geopolitical risk is like the donkey with the carrot. It’s always present but never material.
But when the facts change, you have to change your mind. In this case, there have been so many events since the start of the Iran conflict that have forced me to change my mind. Here are the most important ones:
Following the attack on March 1, Iranian forces retaliated against GCC, not just against Israel alone (in the past). Mosaic defense came into play following the assassination of Ayatollah Khamenei. This was the first red flag.
Insurance is not the issue preventing ships from transiting the Strait of Hormuz. This was evident in the physical implementation of the U-turn in mid-April. IRGC demonstrated that it can forcibly close the Strait of Hormuz; anything that says otherwise is delusional about the facts on the ground.
Despite ongoing negotiations about an MOU or ceasefire, the same playbook by the Iranians is being implemented to effect: delay. Every day they delay a deal, the world loses 11 million b/d of crude oil production.
The reality is that time is not on our side. With each passing day, we are draining away our valuable onshore oil inventories. Governments around the world are releasing SPR, treating it as a short-term event when the reality is the exact opposite.
The IRGC/Iran cannot be in control of the Strait of Hormuz. Bypasses will take years to build; geographically, they will not be able to escape using the Strait of Hormuz.
In essence, my analysis of the situation leads me to one simple conclusion:
We topple the regime (IRGC).
IRGC controls the Strait of Hormuz.
Oil analysts are still assuming some path to normality via the diplomatic route, but the way I see it, it’s dead on arrival. There is no diplomacy here. You don’t negotiate with terrorists. So these half-ass approaches that the Trump administration is embarking on are just playing right into what the IRGC wants: wasting time.
Because the oil math is what it is. Every day you waste is another day you burn through oil inventories. Demand destruction is inevitable, especially when oil inventories in the West reach the tank bottom. Time is ticking, and we are the hostages.