The Week: The 700 Agents That Got Out

They tell you that essentially the Iranians and the Americans are still involved in geopolitical price discovery. They are both trying to assert that they have more leverage over the other than the other is willing to accept. And that is both true economically in terms of the amount of pain that can be meted out by the Americans onto the Iranian economy through the blockade and through sanctions, as well as the threat and the use of military force from Iran. That is true in terms of their ability to continue to strangle some of the exports out of the strait, directly as well as through proxies, and their willingness to engage in military strikes to ensure that they continue to have that leverage. The fact that there is no agreement on those things means that you continue to have an unwillingness to get to a more sustainable place in negotiations. The Iranians demanding a return to the memorandum of understanding. The Americans saying go scratch. Look, these are still contained strikes. The Iranians upset that five to seven million barrels is getting through the strait, a lot less than was before the war, but more than a couple months ago, has led them to engage in putting more mines or attempting to put more mines into the strait and engage in direct strikes against ships that are going through. Once they do that, the Americans take shots directly against Iran. Both of these are still pretty constrained. In the old couple months ago, you'd be calling this skirmishing, right? You wouldn't call this a return to all-out war. It's certainly not an escalation that risks getting other Gulf states directly involved the way they were briefly, that kind of thing. But we're nowhere close to an agreement, and that means that you're still having significant amounts of oil that you do not expect to get through the strait, a significant amount that you do not expect to get out of Yanbu, Saudi Arabia, and through the Red Sea or up through the Suez. One final point: the fact that Trump worked very, very fast to suddenly announce a really big deal with Venezuela, where the Americans would take an almost colonial position in the government, directly engaging in an ownership stake in Venezuelan fields and extraction, is because Trump sees that the impact on a low level of reserve in the strategic petroleum accounts, and that prices are continuing to be higher than he likes, that he needs to address that. So, we should not, from all of the activities that we've watched over the past several days, your expectation for the markets is that this is going on for the foreseeable predictable future.

What's so fascinating about this is this is one of the moments where kind of the American political conversations and kind of just general thinking about how the world operates is colliding so thoroughly with like real material reality. The US, because of its global power, you know, we can print money. We got the Federal Reserve has, you know, operates in a way that no other central bank in world history has ever really been able to operate. Our raw soft power is enough such that when our presidents speak, like it moves entire nations. And so we have lost touch with the idea that underneath that there is a material reality, and that's being exposed now. And in particular, you know, they don't need to launch a coup or launch a mutiny because the stockpiles are what they are. And that's the fascinating moment. Like, you know, Hegseth can reject the advice of these admirals and generals and say, you know what, we're pushing forward anyway, but at some point, you just physically run out of the ability to do the thing. So it's like you can believe these guys are not, but like if you are expending two to four Patriot missiles for every ballistic missile that Iran is firing at Jordan or Israel or Qatar or Bahrain, and you started with a particular amount, which is a public amount of ballistic missile interceptors, and we can count them down, and we know you've drawn them in from Korea. We know you've reduced the amount going to Ukraine. We know that. And Overdrop reported that Israel's own ballistic missile defense stockpile is down into the double digits. They're relying almost exclusively on the US Navy to intercept. They're not getting targeted right now, but as they were at the end of this last war, and if Iran starts striking them again, they're going to be relying almost exclusively on the US to try to intercept these missiles. So those, these are just facts. Like these things cost millions of dollars a piece. They take years to produce. And we're running out of them.

I think that Dan Driscoll's resignation, which we were expecting for the last several months, is a really important moment and a bit of a sea change in terms of who's actually pushing back against the folks at the highest levels of the Trump administration. So, not only do you have the calls coming from inside the house, it's coming from an enormously important person, someone who is very close personally and professionally with Vice President Vance. And instead of kind of shirking away or disappearing and not really, you know, letting us know what this is about, Dan Driscoll went to Donald Trump and told him what this was about. And now finally the disconnect between what's happening on the ground and what the president knows in full force is just being laid out in front of us, which I think is hugely important and, like I said, a sea change here. You know, Dan Driscoll going to the president and saying that the army cannot transform the way it needs to. It cannot become the modern warfighting fleet that we need it to be if it continues to be managed this way. And that doesn't mean that Dan Driscoll didn't believe in a lot of Pete Hegseth's initiatives. They were aligned on much of this, but certainly not in firing all of these generals. And he drew a straight line between lack of military readiness and the individuals that Pete Hegseth was firing for whether he didn't like their social media post, color of their skin, whatever it is that they dared to say.