“The power to destroy a thing is the absolute control over it”
-Paul Maud’Dib (Dune)
I grew up obsessively reading science fiction and still love it. And one of the things that I always felt sci-fi authors were never credited with was their deep analysis of how events were playing out in their own times and how that analysis informed their writing. The analysis of power dynamics, game theory, control, philosophy, personal agency, and morality can provide a deep insight into how humans treat each other. And so, the current events in the Middle East have me thinking about “desert power”. A phrase lifted directly from Frank Herbert's novel Dune. It’s a deep and layered story but it centers around “spice” which is required for interstellar commerce and so it’s harvested on a desert planet which is constantly being fought over by outside powerful entities. Gee, that sounds familiar.
Iran, Hormuz, and the Logic of Leverage
The frame through which the Iran-Hormuz standoff should be understood is through the quote above. Much of the coverage about the conflict misses some fundamental truths, I think. The US and Israel hold conventional military superiority and have demonstrated it convincingly. They killed Ali Khamenei on February 28th. They destroyed nuclear facilities. They decapitated military command including the IRGC's top naval commander. And yet none of this has changed Iran's fundamental leverage position. Iran does not need to win militarily. It only needs to make the cost of keeping Hormuz open prohibitive. Anti-ship missiles, mines, drone swarms, and harassment of tankers and Gulf energy infrastructure accomplish this without ever fighting a naval battle. The 5th Fleet can fight, but it cannot make the strait safe for commercial traffic without absorbing enormous Iranian fire.
Who Actually Has the Leverage?
Whoever can credibly threaten to withdraw something irreplaceable holds asymmetric leverage without ever having to act on it.
Iran has already answered this question through its actions. Its five-point counter-proposal to the US 15-point peace plan includes explicit sovereignty over the Strait of Hormuz, war reparations, and a comprehensive end to all fronts, including against proxy groups. Iran's parliament is formalizing a toll collection system modeled on the Suez Canal. They are already collecting tolls in yuan.
Think about that for a moment. Iran's nuclear infrastructure has been largely destroyed. Its supreme leader was killed. Its air defenses were eliminated. Its top security official Larijani was assassinated in March. And yet the IRGC has consolidated power and is holding its negotiating position. The sanctions-plus-strikes toolkit was insufficient before the war. The escalation to open warfare is evidence of that failure.
The US 15-point proposal demands that Iran end its nuclear program, stop proxy funding, reopen Hormuz, and limit its missile program in exchange for sanctions relief. The view that this is a serious proposal and that the US/Israel are negotiating from a strong position that can dictate terms fundamentally mistakes who holds the leverage. Iran's revealed preference is to negotiate from its current position of Hormuz control, not to trade it away. They are not negotiating for the right to keep what they have. They are telling us what the new arrangement looks like.
The Power Plant Ultimatum
Trump has threatened to destroy Iran's power plants unless Hormuz is reopened. Iran responded by threatening to completely close Hormuz and strike desalination and energy infrastructure across the Gulf states. Trump extended the deadline by five days.
This sequence exposes the trap cleanly. The threat is not "hit power plants and Iran folds." The threat is "hit power plants and Iran escalates to the thing you have been trying to avoid." The domestic US political clock is running faster than Iran's military capacity is degrading. The US is effectively out of escalation options that do not risk a global energy catastrophe and actual US troops on the ground. 52% of Republicans already oppose ground troops and gas is approaching $9 a gallon in California.
Short of a full ground invasion and occupation — which would trigger the exact scorched earth response it is meant to prevent — there is no military option that fully removes Iran's ability to strangle Hormuz passage and destroy Gulf energy infrastructure. This creates the central paradox: the very threat required for negotiating leverage would trigger the outcome you are trying to avoid. Destroying the oil supply that the world depends on and cannot do without.
How This Plays Out
I see three possible outcomes, in rough order of likelihood.
The most probable is a negotiated partial settlement where Iranian leverage is preserved. Iran gets de facto Hormuz sovereignty, toll collection, partial sanctions relief, and a ceasefire framed on Iranian terms. The US frames it as deal-making. Neither side publicly gets its maximalist demands, but Iran keeps structural control of the strait. This is already partially underway.
The second possibility is a prolonged stalemate. Neither side can close this cleanly. The US cannot force compliance without ground troops and Iran cannot withstand indefinite bombardment but doesn't need to in order to maintain Hormuz pressure. The war grinds for months, oil remains elevated, the global recession deepens, and a face-saving formula eventually emerges under duress.
Last and least likely is a ground invasion. Netanyahu has said the revolution requires a "ground component." The political and economic cost of the current stalemate may eventually force this, but it triggers the exact scorched earth scenario everyone is trying to avoid.
What This Means for Portfolios
The framework here points to a prolonged stalemate punctuated by escalation episodes rather than a clean resolution in either direction. The risk to energy markets is not a permanent Hormuz cutoff. The Hormuz toll system is the thing to watch. If it survives and gets normalized, it represents a structural shift in how Gulf energy is priced. That has implications not just for crude but for everything downstream — petrochemicals, shipping insurance, refining margins, and ultimately consumer prices in energy-dependent economies. This is not a temporary disruption. This is the early stages of a new pricing regime for a significant portion of the world's energy supply.
We are watching what I described in my February note.
“Institutions previously seen as nonpartisan and part of the “plumbing” of how nations interact are increasingly being weaponized,…
Our thesis is that this restructuring of trade patterns and supply chains to a less interdependent world will embolden those seeking conflict. It will provide a ready excuse under the guise of securing resources, as the US recently did with Venezuelan oil. It will also make the international community less able to impose meaningful consequences like sanctions. This new world of siloed supply chains will take time, money and political will. And since building out these solutions could be an existential question for nations and regional powers, they will likely be largely price insensitive. This, plus the move from more to less efficient processes, will encourage securing resources to not only meet national needs, but also in part to deny them to rival powers. All of this will lead to a structural shift to more expensive commodity prices and a structurally inflationary world.” – Feb 2026 note
In this case the “plumbing” is the free passage of the Strait of Hormuz. Geopolitics is the catalyst for more expensive commodity prices and structurally inflationary world. The old plumbing is being rerouted. The question is not whether this changes the landscape, but how much of the change is already being priced in. I don’t think enough of it is. This is just more wind in the sails of a commodity cycle that looks to just be getting started.