The New Grand Game

There's a popular narrative running on X right now. That the US is playing 4D chess at Hormuz. Slow walking the reopening for leverage. Everything is going to plan. It's wrong. And the ground truth is more interesting than the cope. @citrini has an analyst physically at the Strait. What they're seeing: Traffic is picking up. 15+ ships have crossed, including VLCCs. Low double-digit percent of pre-conflict volume, up from near-zero a week ago. Some running dark. AIS off. Here's the part that breaks the "negotiation filter" narrative: the ships getting through aren't transiting because the US reopened anything. They're transiting because Japan, the EU, and other US allies are negotiating passage directly with Iran. Country by country. Bilaterally. With a country the US is actively bombing. Read that again. America's closest allies are cutting side deals with America's enemy to secure their own energy supply, in the middle of a war, because the US isn't doing it for them. That's not 4D chess. That's being routed around. "The US can militarily open the Strait tomorrow if it wants." Can it? An F15 was shot down yesterday. The first US combat aircraft loss. An A-10 went down in the rescue. 86% of Americans are concerned about troop safety. 75% oppose ground forces (Reuters). US intelligence assesses Iran is unlikely to ease the chokehold soon. "Tomorrow" is fantasy. What's actually happening is something the foreign policy establishment hasn't fully processed. The first major energy crisis where US allies are solving their own supply problem by negotiating with the adversary during the conflict. Not after. During. Before this war, it was hard to imagine Japan and the EU working diplomatic channels with a country under active American bombardment to secure tanker passage. Now it's just.. how the world works. As @citrini put it: "These countries must deal with the issues imposed, as the US won't be sorting it out on their behalf." This matters beyond the war because it's structural, not temporary. @vtchakarova calls Hormuz the fourth systemic crisis after the GFC, Covid, and Russia's invasion. She's mapping the cascade: gas disruption → fertiliser production collapses → European harvests fail within two seasons. Europe nearly hit this wall in 2022. There's still no structural fix. @karim__fawaz is tracking the transition from supply crisis to demand crisis. His three tiers of demand destruction: First adaptation (already happening in Asian petochemicals), then price elasticity grinding down GDP, then physical rationing. The longer Hormuz stays in this "partially open, mostly closed" state, the further down that pyramid we go. The consensus frames this as binary: Hormuz is open or closed, deal or no deal, war or peace. The reality on the water is none of those things. It's a managed, multipolar energy chokepoint where passage is negotiated nation by nation while bombs are still falling. Not resolution, not catastrophe. But a new normal that slowly degrades into structural damage. Both the "4D chess" crowd and the "we're doomed" crowd are missing it. The US isn't masterfully orchestrating and it isn't collapsing. It's watching its allies build the post-unipolar energy order in real time, at the exact chokepoint where American security guarantees were supposed to make that unnecessary. The last time a Western power discovered its allies had moved on without it at a critical chokepoint was Suez, 1956. That was the week Britain stopped being a superpower and started being a country with a good navy. Hormuz isn't Suez. The US isn't Britain, and this isn't collapse. But the rhyme is there.

The midterm pressure tracks but "nothing to lose" overstates Iran's position. The IRGC runs an economic empire worth tens of billions. They have plenty to lose. The selective Hormuz reopening (country by country, bilateral deals) looks more like careful calculation than desperation. Iran is playing for a deal that preserves the IRGC's economic network. Not gambling everything on collapse.

The current hypothesis is: if Iran doubles down, GOP goes down in the midterms. Iran knows it, Trump's advisors surely know it, while what Trump actually knows remains a mystery. That's the reason Trump is in a bind: he can stop the hits on Iran tomorrow, but Iran may decide to go on with causing a global economic crisis anyway. After all, the regime is fighting for its survival; it has nothing to lose. If Trump uses the ground troops to open the Strait, he risks continued US casualties. That would produce a similar negative effect to the consequences of a global economic crisis. What does he do in this situation: he finds a scapegoat, blames Europe.

"Ukrainization of the region" is doing a lot of work here. Iran is telling you they've studied what a grinding infrastructure war looks like and they're willing to start one. Thats not bravado from a regime that's been watching Ukraine for two years. The Saudi targeting piece is designed to make Washington calculate whether protecting Saudi oil fields is worth what comes next.

From an account close to Qalibaf:

Japan, UK, France, Italy all running out of fiscal room at the same time they need to spend on defence. The US still has the reserve currency as a pressure valve (for now). That asymmetry is doing a lot of work.. Washington can borrow through a crisis that Tokyo and Berlin can't. Does that make burden-shifting more likely or less?

I keep hearing the word complacency regarding oil prices. Maybe. But the real complacency is in global debt markets. We have an inflationary shock and fiscal policy that - especially in Europe and Japan - is out of control. This is the real complacency... robinjbrooks.substack.com/p/the-lurking-…

The logic works short term but a failed-state Iran is worse for Israeli security than a stable Iran bound by a treaty. Failed states produce exactly the kind of non state actors Israel has been fighting for decades. Hezbollah came out of Lebanon's collapse. What comes out of Iran's?

Israel's systematic bombing of Iran's key industrial infrastructure, steel works, petrochemicals, pharmaceuticals... is designed to destroy Iran's economy, prevent post-war reconstruction, setting the country on the path to becoming a failed state nytimes.com/2026/04/04/wor…

Yes but watch how they're doing it. Selective passage by country, not a blanket reopening. That means every government that wants its tankers through has to negotiate bilaterally with Tehran. Oil comes back to market slowly, prices ease just enough to keep allies from panicking.. and Iran ends up with a de facto seat at the table for Gulf maritime security. Does that leverage disappear when prices drop?

The Iranians aren't morons, they aren't going to allow enough oil and gas back into global markets by choice that will significantly limit the leverage they are attempting to exert on the Americans to end the war on Tehran's terms.

80% European procurement by 2030 assumes an industrial base that doesn't exist yet. Rheinmetall is scaling but you can't build artillery shell production lines in 18 months. The actual gap-filler this decade is South Korea (Poland's already bought K2 tanks, K9 howitzers, FA-50s at volume). Europe will be mixing American and Korean kit for years because European factories can't produce at the scale needed. The real question is what the defence industrial map looks like in the 2030s, and thats a different administration's problem.

I am not sure the American military establishment has fully grasped what Trump has actually done here. So let me spell it out in language even a Pentagon procurement officer can understand. Europe has been buying American weapons at a staggering rate. In 2024 alone, US foreign military sales notifications to European countries hit $76 billion. Four times the European average since 2008.  F-35s, missile systems, air defence, ammunition. All of it American. All of it coming with decades of service contracts, maintenance agreements, spare parts, software updates and training programmes worth hundreds of billions more over their operational lifetimes. Between 2020 and 2024, the United States supplied 64 percent of all European weapons imports.  That is now over. Europe has an $860 billion defence plan, and American contractors are being frozen out. The goal is 80 percent of all military purchases from European factories by 2030.  Airbus. Rheinmetall. KNDS. Saab. Leonardo. BAE Systems. They are about to receive the largest order book in the history of European defence industry. Because Trump made it politically impossible for any European government to keep writing cheques to Washington. Some European governments have discussed worries that the Pentagon could remotely disable American F-35 fighters or impose restrictions on how US weapons can be used.  When your supplier is also threatening to annex your allies, that is not paranoia. That is basic procurement logic. Trump set out to make America great again. He has succeeded magnificently. For Rheinmetall. Gandalv / @Microinteracti1

@vtchakarova Cutting storage targets from 90% to 80% isn't pragmatism. It's pre-positioning the excuse for how much shortage is politically survivable.

Europe’s primary vulnerability is structural, not cyclical: the continent has replaced Russian pipeline gas dependency with Qatari and American LNG dependency and 17% of Qatar’s LNG capacity is now offline for the next years. The EU started 2026 needing to inject 60 billion cubic metres (bcm) of gas to reach its 90% storage target by December. At 28% storage (Germany 22%), the summer refill season which starts tomorrow (5 April) under the Summer 2026 delivery contract is the next critical battleground. The EU has already cut its storage target from 90% to 80% in recognition of structural supply constraints. The April 6 Trump deadline is Europe’s most immediate binary decision point. If the US strikes Iranian power plants and oil infrastructure (Kharg Island), Brent could move toward $150–200/bbl. If diplomacy produces even a partial Hormuz reopening, prices could correct 15–25% within days. Europe is entirely exposed to this binary as a price-taker with no independent military role in the Strait.

@vtchakarova No amount of tax relief fixes a logistics chokepoint. Only two things reopen Hormuz. A deal that isn't coming before tomorrow's deadline, or a naval operation 75% of Americans already oppose.

This is not demand shock induced crisis. This is supply shock induced crisis due to physical scarcity in the energy field. Clearly, decision makers in these countries still don’t understand that something multiplied by zero is still zero. You can’t beat systemic risks with taxes.

@HFI_Research 6-8 weeks puts first barrels at mid-May. Trump deadline is tomorrow, OPEC+ meeting is today, Trump-Xi summit in six weeks. Lot of political risk sitting between the headline and actual supply.

Iran exemption on Iraq crude exports will be contingent on a few variables: 1) Tankers stuck near the Iraqi ports will have to unload the crude first. 2) Empty tankers need to pass through the Strait of Hormuz to await loading. Onshore storage will have to drain, and then production will start. 3.4 million b/d of crude oil production gets unlocked. Lead time to production restart: 6-8 weeks. Impact on oil price: bearish.

@anasalhajji Not a contradiction. It's a valve. Exempting transit while disrupting production means Iran controls exactly how many barrels actually flow.

So… the Iranian IRGC exempts ships carrying Iraqi oil and allows them to sail through the Hormuz Strait, but drone attacks on Iraqi oil fields continue.

@vtchakarova Pakistan got exempted from Hormuz restrictions. Whether the mediation is real or performative, the result is the same. Show up, offer to host talks (or criticise the US ala Macron), get your ships through.

Pakistan stands out as one of the countries paying a heavy price. It’s heavily dependent on energy supplies from the Gulf. And with the Strait of Hormuz blocked, its government increased fuel prices twice in a month. It triggered mass protests as people were furious at the government’s decision to pass on the burden of higher costs. More countries will be affected by similar cascading effects - Bangladesh, Egypt, Sri Lanka, the list is long.

@JavierBlas The list keeps growing every few days. China, Russia, India, Pakistan, France, Japan, now Iraq. Less blockade, more customs regime.

BREAKING: Iran says that Iraq vessels can cross the Strait of Hormuz. “Brotherly Iraq is exempt from any restrictions we have imposed on the Strait of Hormuz,” an Iranian spokesperson said on state media. However, it’s unclear whether that narrowly refers to Iraqi flagged ships, or more widely to any vessel transporting goods (read oil) from Iraqi origin.

@JavierBlas They're reopening Hormuz country-by-country on their own terms. Iraq exempted yesterday, France and Japan ships already crossing. Looks more like they're trying to build a permanent permission system for the strait while everyone's distracted by the price.

Iran can remain irrational longer the Donald Trump (and the global economy) can stay solvent.

@Rory_Johnston The words say almost over. Meanwhile Israel is prepping energy site strikes waiting for the green light and the reinsurance facility just doubled to $40b.

> say war is almost over for weeks > repeatedly jawbone oil market lower > say war definitely nearly done > pressure satellite imagery providers to *indefinitely* withhold imagery from war zone that could help market (and public) make their own judgements

@Rory_Johnston 3.4m barrels is the headline but its the mechanism is doing the work. Iran is deciding country-by-country who gets to transit. Iraq today, Pakistan and France last week. Permanent permission system in play on Irans terms.

Potentially massive development. “Brotherly Iraq is exempt from any restrictions we have imposed on the Strait of Hormuz,” Iran’s military spokesman said. Iraq is the Gulf country that has shut in the most crude production capacity at >3 MMbpd—swinging that back would be huge.

@LukeGromen Hormuz is already reopening. Just on Iran's terms. Iraq exempted today, France and Japan ships already crossing. The supply shock fades but Iran keeps permanent leverage over who transits. Who is pricing this?

In COVID oil demand was down 9.2% y/y. All it took was shutting down much of the economy & handing out stimmy’s. You think we can shut the economy more than COVID, with no stimulus and without stock & bond markets, banking systems, & sovereign credit blowing up? 🤦‍♂️

The energy dependency is the mechanism here, not the problem. Every month that passes with Hormuz closed is another month EU defence budgets grow and US LNG market share expands. Washington doesn't need Europe to fix this. It needs Europe to feel the pain long enough to restructure.

Europe imports 80% of the hydrocarbons it consumes and that oil and gas keeps getting more expensive as they unplug from Russian gas and become hostages of the Strait of Hormuz. Germany resisted deindustrialization during the “China Shock” of the early 2000’s in large part due to the ultra cheap Russian pipeline gas that it built its economy around since the 1970’s oil shocks. France electrified its way out of its oil dependence with 54 large reactors built in 20 years. Today’s Europe is short on domestically produced hydrocarbons, refuses to explore for more and has lost the state and industrial capacity to build nuclear effectively. It has somehow convinced itself that deindustrialization and offshoring emissions to Asia was climate heroism. That buying hydrocarbons from elsewhere rather than producing them at home would absolve them from their sins. Will 1970’s energy literate leadership return to Europe? What do you think?

Right. And the critics treating each crisis as a separate policy failure are completely missing the connective tissue. Iran forces European energy independence. Ukraine forces European defence spending. China forces supply chain reshoring. Same strategy, three theatres. The delay has made it messier but the direction was always inevitable.

I get the risks and concern about the the US is doing in Iran but what is perfectly clear, and should have been for roughly the past decade, is that the state and direction of the world is very dangerous. Iran was headed towards nuclear weapons and starting wars all over the Middle East, Russia invaded Ukraine twice and the Europeans and Obama/Obama 2.0 were worthless, and China was becoming more dangerous and less risk averse. We delayed so long it required larger steps to address. There is a long long way to go and big risks exist no question but if you think the status quo was positive and healthy there really is no point talking to you

The bilateral momentum is real. Countries cutting deals. But I think the "subscription fee" framing has a game theory problem. Every tanker that pays Iran's toll validates the blockade as a revenue model. That means Iran's incentive isn't to reopen. It's to keep the chokepoint just constrained enough to extract fees indefinitely.

@michaelxpettis This is why tariffs are working for the US. Shut down export channels and the only GDP option left is more domestic investment splurges. The debt treadmill speeds up, not slows down. Tariffs don't force rebalancing. They force deeper imbalance.

1/4 Caixin: "Investment in China’s urban rail networks is set to plunge nearly 34% in 2026, the fifth consecutive year of declining capital expenditure, as local governments struggle with mounting operating losses and tighter project-approval requirements." caixinglobal.com/2026-04-03/chi…