The Impact of the Ground Game on the Price of Energy: The completion of the perfect Thucydides Trap

What we are witnessing is a highly politicized military with key positions held by sycophants, led by amateurs with no clear strategic vision nor political end state. And they are up against a state holding favorable terrain, with a laser sharp political end state, a logistics raiding strategy prototyped over the last few decades in Iraq, Syria, Lebanon informed by lessons learned in Ukraine.

The opening month of this 4 day special operation has erased 5 trillion dollars of value from the S&P and sent shockwaves thru the energy state. A sensible power blundering their way into this trap would immediately back up and withdrawal. But we are lacking sensible leaders. We have bypassed all of our checks and balances on the concentration of power. Hegseth, Rubio and Caine are unqualified for the roles they hold. And who entrusts the most important negotiations for the last 47 years to your son in law and a random real estate agent buddy? We have been reduced to relying on the war instincts of a draft dodger. The Iranian military and strategy was designed to fight the US at its best, they were expecting a harder fight against a smarter opponent. But it is what it is, just have to price this in.

But what could make things worse? Boots on the ground. Once the US is committed to a land war in Asia, I refuse to accept the claims that it will be a two month campaign. We will be engaged in a land war in Asia. Ground war are messy events, troops will die, politics will become polarized, the cries to stay the course and not let soldiers die in vain will become louder by the day.

Iran will most likely respond by burning the region down, removing 20% of the oil, 30% of LNG and Fertilizer, etc.. from the market for the duration of the war plus 6 months to a year. End of the world? Hardly, I will make a small fortune off the rewiring of flows and the doubling of prices. I'm not overly concerned about the scenarios I'm prepared for, what about second order effects? Global recession, political instability, harder to quantify but again I'm already hedged to survive and flourish in such a downturn. It will be harder for the average person, more girls on only fans, fewer real jobs for newly minted college grads, higher interests rates to combat inflation, high food and energy prices. These aren't my personal concerns.

So what do I worry about? 3rd order effects. Imagine you are a Russian general, you look and see what Iran has done in a month with less than what Russia was unable to do in 4 years with much more. You see the US locked into a ground war. What thoughts must be racing thru your head? A Ukrainian spring offense? Throw your troops against hardened AFU positions? Or launch air and missile strikes against EU and UK weapons, logistics and energy hubs. Why fight the bouncer when you can pummel the bag man. With the US occupied, an Iranian style horizontal escalation into Europe favors Russia immensely.

What about China? China doesn't need to go to war to bring Taiwan to her knees. The US is occupied. Japan and Korea will be suffering an energy crises and potentially a recession. China can use drones and submarines to enforce a selective blockade of Taiwan. US interceptors have been stripped from the pacific. As long as China offers Trump a face saving deal; common customs union with Taiwan?, the US might accept it just to keep fragile markets from imploding altogether.

And these are only the big two. How many other simmering conflicts are smoldering around the world ready for the US to become engrossed in a land war in Asia to burst aflame anew? And with high prices of energy and the willingness of capital to back winners, I could imagine new opportunistic resource wars to boil out of the woodwork. Remove 20% of the world's oil and what remains isn't just 20% more expensive. Marginal pricing is the devil.