There's a scene in the movie Wag the Dog — that classic with Dustin Hoffman and Robert De Niro — where a president fabricates a war to distract from a domestic scandal. The movie came out in 1997. Seems like someone in Washington never watched it. Or watched it and thought it was an instruction manual.
Trump dropped this week that a war against Iran would be "more popular than ever" with his MAGA base.
Read that again. Slowly.
A President of the United States — the guy with his finger on the nuclear button and his hand on the lever of the world's largest economy — is essentially polling the popularity of an armed conflict in the Middle East like it's a survey about ice cream flavors.
And the market? The market heard it. It always does.
Oil Is the Thermometer That Doesn't Lie
Dow Jones futures have already started pricing in the tension. But the real show is in the price of oil.
Every time someone in a position of power opens their mouth about Iran, crude has a mini heart attack. And it's not paranoia — it's math. Iran controls the Strait of Hormuz, through which roughly 20% to 25% of all seaborne oil in the world passes. A real conflict there isn't a "market event." It's a magnitude 9 earthquake on the global supply chain.
When Soleimani was taken out in January 2020, oil jumped nearly 4% in a single session. And that was a surgical strike, not a declared war.
Now picture the full scenario.
The MAGA Base and the Real Economy
This is where things get schizophrenic.
The same base Trump says would support a war is the one that gets hit hardest by expensive gasoline. We're talking truckers, rural workers, pickup truck owners logging 300 miles a week. Oil at $90, $100, $120? That's not bullish for anyone living in the real world.
It's the oldest story in the book: the crowd cheers the fireworks until they realize the rocket landed in their own backyard.
And the Dow Jones futures know it. The American stock market has a love-hate relationship with military conflicts. In the short term, defense companies — Lockheed Martin, Raytheon, Northrop Grumman — take off. In the medium term, energy inflation eats everything alive: consumer spending, corporate margins, purchasing power.
Nassim Taleb would call this "inverted antifragility" — the system that looks strong breaks precisely because the person making the decision doesn't pay the price. Zero skin in the game.
What Investors Should Be Watching
Look, if you've got money in energy-linked commodities, in oil stocks, or even in dollar-denominated assets, this is relevant to you. This isn't just generic foreign news.
An Iran-US conflict means:
- Oil through the roof — good for oil producers in the short term, terrible for inflation
- Stronger dollar — classic flight to safety, emerging market currencies take a beating
- Global interest rates under pressure — forget rate cuts in the US if energy prices explode
- Gold climbing — the same old safe haven whenever the world decides to play war games
Central banks around the world would have yet another problem on their plate. As if there weren't enough already.
The Rhetoric Is the Weapon
The most likely outcome — and this is where investors need to keep a cool head — is that this stays in the realm of rhetoric. Trump is a master of calculated provocation. He drops the verbal bomb, gauges the reaction, and adjusts the narrative. It's negotiation straight out of Art of the Deal, chapter "maximum pressure."
But markets don't operate on "most likely." Markets operate on probability distributions. And when the tail of the risk — the tail risk — includes a conflict in the Strait of Hormuz, the risk premium goes up for everyone.
As the great Bruce Kovner used to say: "I know where I'm getting out before I get in."
Do you? Because if Trump keeps escalating the verbal warfare and you're sitting there with no hedge, no stop-loss, no Plan B... well, then the tent catches fire with you still inside.
And this time, no amount of popcorn is gonna make you feel better.
