Trump likes to take chances with no regard for possible outcomes.
Escalating to Escalate More
Eurointelligence discusses the folly of Escalating to Escalate More
The world’s markets may be about to learn an abrupt and unfortunate lesson in assessing tail-risks. The war between the US and Iran has just expanded, to effectively include a new theatre, and new combatants. In Yemen, the Houthis, an Iranian proxy group, announced a maritime blockade on Saudi Arabia. Although the Houthis are fairly independent of Iran’s regime compared to some other groups, it’s still hard to believe this wouldn’t have been coordinated with Tehran.
In and of itself, this is potentially quite a significant problem, especially for global oil supplies. Saudi Arabia has been sending about 5m barrels per day worth of oil through the Red Sea to bypass Iran’s closure of the strait of Hormuz. Most of that is passing through the Bab el-Mandeb, a strait separating Yemen and east Africa, and connecting the Red Sea to the Gulf of Aden and Indian Ocean. The announced maritime blockade directly affects this.
Like with the strait of Hormuz, the problem for oil buyers is that an announced blockade or closure does not need total coverage to be effective. Once you hit several ships, that often creates sufficient deterrence to cause a much larger drop in traffic. The last time the Houthis interdicted shipping through the Bab el-Mandeb, it caused a 50% year-on-year drop in oil volume shipped through that strait in the first eight months of 2024. Kpler data now suggests that Saudi oil loadings already dropped 36% in the past two weeks amid increased threats from the Houthis.
This is also potentially a bigger problem than that closure. Although oil was affected through 2024, the biggest problems were for container shipping. But container ships could, and would, go around the Cape of Good Hope instead. For oil shipments originating from the Red Sea itself, this is obviously a lot tougher. They would have to either go through the Suez Canal and then around Africa, or through Egypt’s oil pipeline transport system. This presents both capacity and practical limits.
Beyond this, what’s also worrying about the Houthi announcement is that it takes us one rung further up the escalation ladder. The Iranian regime had been keeping the Bab el-Mandeb as a back-up option for quite some time, holding off from closing it and letting the Saudis send their crude out of the Red Sea. Now they are intentionally broadening the conflict.
Escalation Risk
“From this point forward, any time the Islamic Republic of Iran shoots at a ship in the Strait of Hormuz…the United States will bomb and destroy one bridge or power plant,” Trump wrote on Truth Social.
“Our defense doctrine is clear: eye for an eye,” Iranian Foreign Minister Abbas Araghchi responded on Twitter.
Trump ‘Stuck’ in Iran War Stalemate
Also consider Trump ‘Stuck’ in Iran War Stalemate
Trump appears frustrated that Iran has not surrendered, said former U.S. Iran negotiator Robert Malley.
“President Trump, frustrated that Iran will not bend to his will, is once again threatening war crimes in pursuit of an unlawful, unjustified war whose purpose has become to remedy the very problems it created,” including “to reopen a waterway that was not closed before he launched it,” Malley wrote on Twitter commenting on Trump’s Truth Social threat. “It’s the theater of the absurd, but one in which blood is shed.”
“It’s a bombing campaign NOT in search of a strategy,” commented Rosemary Kelanic, director of the Middle East program at the Defense Priorities think tank, in evident exasperation.
Trump ‘Stuck’
“Trump appears to be stuck,” Gregory Brew, senior Iran and energy analyst at the Eurasia Group, told me by email today. “He’s comfortable continuing the daily air strikes on Iranian military targets and the ongoing effort to degrade Iran’s capabilities in the Strait of Hormuz, but appears unwilling to significantly escalate against more vulnerable targets, likely out of concern that doing so would trigger more destructive Iranian retaliation in the Persian Gulf.”
Nothing But Bad Options
“Trump has nothing but bad options,” he said. “He can stay the course and hope that weeks of grinding air strikes will force the Iranians to make concessions. He can escalate and risk a much deadlier, more destructive conflict– again, without much confidence that the Iranians will cave. Or he can return to the negotiating table and try to strike another deal.”
“Trump has driven the US into a dead end,” former U.S. diplomat Daniel Serwer wrote. “A return to negotiation will save a lot of lives and money. But it will have to be a negotiation over the terms of tolling. That is a big loss from the US, but it’s where we are at.”
“I think diplomacy is dead,” Kelanic said. “And I think if it wasn’t dead already, the announcement that Trump is going to help the Saudis with nuclear capabilities I think completely killed it.
“Because from Iran’s perspective, this whole war is being fought because we didn’t want Iran to enrich uranium,” she said. “And then the U.S. turned around and said, in the middle of a war, that we’re going to give their regional rival potentially the ability to enrich uranium. And so that has to that has to be completely shocking to Iran. That has to make them believe all along that Trump was never negotiating in good faith, right? Because all the arguments that Trump made about why Iran shouldn’t have enrichment should apply to the Saudis. Apparently, they don’t.”
Iran Lays Down the Line
Second Strait Blocked
Who Is Blocked?
Avoiding the Blockades
Three Questions for MAGA
- Are you tired of winning yet
- Are wars and inflation what you voted for?
- How fast the TACO?
Hegseth Blasted Over Lies
On July 21, 2026, I commented Hegseth Blasted in Congress Over His Lies Iran’s Military Capability Destroyed
Hegseth seeks more money for illegal wars. Just say no.
Oil Surges Six Percent
On July 23, 2026, I commented Oil Surges Six Percent. Brent Above $100, WTI at $92. Thank Trump
Trump’s tit-for-tat war with Iran escalates. You pay the price.
Tail risk is already happening. We no longer have one closed strait; there are two closed straits.
Everyone is paying a price for Trump’s incompetence. And risk keeps growing the longer the strait (make that straits) are shut.
Article posted with permission from Mish Shedlock
