Today is July 15, 2026, and as I write this article, we are nearly five months into the conflict between the United States, its allies, and Iran in the Middle East. A conflict that, in the minds of the US military strategic panel, was supposed to last perhaps 48 hours.
However, what is now undeniable is that a series of gross miscalculations sent the conflict spiraling out of control. After the swift regime change failed, the original timeline was stretched to three to four weeks by the US administration. Now, five months in, after a brief pause during which both parties, pushed by their international allies, pursued a peaceful resolution to preserve the world economy, the military confrontation is back at full scale. A second stage of confrontation that I always warned about.
If anyone paid attention to how the memorandum of understanding between the US and Iran was reached – the fourteen points both parties were supposed to meet before beginning a proper peace negotiation process, a process that should have lasted sixty days and perhaps ended with another nuclear agreement – that memorandum NEVER had a real chance of holding.
This is where things become truly fascinating. At first, one could claim that reaching any agreement at all was a step in the right direction. In reality, before long, the truth started surfacing, and high-profile members of the US administration, most famously JD Vance, even acknowledged that the memorandum served a different purpose: it was meant to give the world time to restock oil, and to give the US time to regroup and resupply its military forces in the region ahead of the resumption of conflict. It is fair to assume the Iranian side agreed to take part in the MoU charade for the very same reasons.
President Trump said it outright at the beginning of June: the reason the administration ultimately came to an agreement with Iran, at least for the benefit of cameras and mass media, accepting (or pretending to accept) many Iranian once-unacceptable requests, was because the world would have run out of oil in four weeks.
Fast forward to today. The memorandum of understanding is clearly dead. The ceasefire is over. The war has started again. A war that, so far, has been narrated more effectively by the US, which is now keeping the war zone limited to the area around the Strait of Hormuz. Rather than a war aimed at triggering regime change in Iran, this has effectively become a territorial war for control of a vital choke point in the global economy. So far, both sides have exchanged fire, striking specific targets and infrastructure directly or indirectly tied to the military effort to control the Strait of Hormuz.
But here is what has been misleading markets.
The official market narrative, especially in the US and in crude oil markets effectively controlled by the New York Mercantile Exchange, part of the Chicago Mercantile Exchange Group, is that the Strait of Hormuz is open and under US control, with US military escorts guaranteeing safe transit for commercial shipping, especially oil tankers. This is a lie repeated over and over through a familiar psychological technique: repeat something often enough, and people accept it as reality, shifting attention away from what is actually happening unless they are directly exposed to it in their daily life.
And because most of the operators in the financial markets are not living the reality of the Middle East, and because of the extreme bullish environment and blind faith in the “Trump trade” since 2016, there is every bias to accept the narrative most convenient to support those biases. So far, it has worked.
It worked until yesterday, Tuesday, when President Donald Trump once again backtracked on some of his threats, especially the threat to impose a 20% toll on the value of cargo transiting the Strait of Hormuz under US military escort. He then stated again that everything was open: the Strait of Hormuz was fully open, the US would be its guardian, and the only ones not allowed to use it to sell oil or ship goods would be the Iranians, who, as of Tuesday at 4 PM Eastern Time, are under a US naval blockade. After President Trump posted this on Truth Social and reiterated it in a White House interview, the market reacted as it has for the past five months, pushing oil prices down, this time from $81.50 to $78 on the WTI. A big move in normal times. Yet one thing is worth noting: this time, the move was more limited than other knee-jerk reactions we saw in the past 5 months. A signal that more market participants are treating the information they are being fed more carefully than before.
Still, this is a market driven by trading algorithms, momentum-chasing strategies, an insane amount of speculation, and irrational exuberance. When trading in the direction President Trump has pointed has repeatedly been profitable, recency bias keeps a large share of the market committed to the same trade, and the swings continue.
This world is very different from the one of the past. The war is not fought only on the battlefield; it is also fought in mainstream media, financial markets, and, for the first time, on social media. That is what makes things so complicated.
Effectively, the US government and Iran are not fighting the same war. Iran is fighting for survival – a war to break the chains that have kept its economy constrained and impoverished in many ways for the past forty-seven years – and to re-establish its influence and power in the Middle East.
President Trump, by contrast, is fighting an economic war, especially in financial markets. From a strict perspective, the United States does not import a significant amount of crude from the Middle East; most of it goes to Asia, especially China.
President Trump is fighting a war in financial markets and a war for consensus. After the failure of the 2025 tariff policies – a failure that, in the end, became the biggest driver of an incredible bull market, even though the opposite should have happened – he is left with an unresolved reality: without those tariffs, the US cannot rebalance its deficit. There is not enough money to support the reform, economic revival, and everything that was supposed to rebalance commerce and make the US economy stronger as Trump promised during the 2024 election campaign.
Tariffs have been President Trump’s most successful failure so far, because financial markets rewarded him once again for failing the real economy. This pattern has persisted for many years. Since 2008, policy and government efforts in the United States have largely inflated asset prices while penalizing the economy, producing one of the most distorted K-shaped recoveries in modern history.
Once again, markets have rewarded President Trump for failure: no one can deny that, militarily, Iran won the first round of confrontation. Yet markets did not acknowledge that, and the strong stock market rally to fresh all-time highs has been wisely used as a propaganda tool to drum up support and consensus for President Trump, especially within the US.
So, on one side, Iran is fighting a military war, a war of resistance and civilizational survival, as its population conveys it. On the other, President Trump is fighting an economic war on the terrain of financial markets. That means Iran needs to start fighting the financial-markets war, and/or President Trump needs to escalate the war on the ground, if this is ever to end. Otherwise, it will become an incredibly expensive, protracted war of attrition between two countries that, so far, have gained little from these developments in practical terms.
Even if we argue that Iran has gained geopolitical influence, revenue, and relevance by claiming control of the Strait of Hormuz, that control is heavily challenged. Iran cannot claim full control if it cannot freely move its ships out and sell its oil. Everything remains at stake.
On one side, President Trump, if the goal is to change the balance in the Middle East immediately, has the option of one last roll of the dice: boots on the ground and an invasion of strategically important Iranian territory, especially Kharg Island. On the other side, Iran needs to enter the financial-market battlefield and dismantle the strong US narrative that has been driving them. While for political reasons President Trump won’t be able to order boots on the ground till after mid-term elections are over in November, I am not surprised that, in the past twelve hours, the Iranian Revolutionary Guard Corps has issued threats sending a clear message to financial markets: if Iran cannot sell its oil and support its economy, it will ensure that no one else in the region can either. That would mean disrupting other vital supply routes, such as the Bab-el-Mandeb Strait or the East-West Yanbu pipeline in Saudi Arabia.
So far, markets have not taken these threats seriously. They continue to trade as if this round of confrontation is merely another window before returning to the negotiation table, completely misunderstanding the level of escalation.
While we know the options for President Trump, and especially the timing, are unfavorable for launching a ground invasion right now, and will remain so before the midterm elections, Iran faces far fewer constraints on escalating the war in financial markets.
Markets are not pricing this risk at all, especially the oil market, where the bearish bias remains strong, the max short position remains elevated, and threats from the IRGC are still being mostly dismissed. Everyone knows what would truly pressure President Trump, internally and internationally, is a stock-market crash and high oil prices. If Iran managed to deliver that, it would likely mark the end of the conflict in the region and the beginning of a long, painful normalization process.
To achieve this, Iran needs to deliver a shock that cannot be watered down by the US government narrative.
This is why I want to conclude today by warning everyone to keep their eyes wide open for something sudden. The threats have been made clear, but have been ignored. Something could happen when nobody expects it. Something we do not anticipate could happen with the sole purpose of delivering a shock to a financial market that is positioned in the worst possible way to absorb it. A shock that, if successful, would shift the balance in Iran’s favor.
JUSTDARIO Premium is now live on Slice Finance
Dear readers and followers, after many requests over the years for more direct access to me and premium content, I accepted the invitation to join as a mentor and launched a Premium Subscription on Slice Finance this Sunday. Slice Finance not only lets me share premium content, commentary, and trade ideas for a market-professional audience, but also provides many tools you can use to directly interact with me easily: live chats, group chats, and weekly live streams. I’ve set the subscription fee at a fair, accessible price with no fixed time commitment. If you’re interested, you can subscribe to my premium content by clicking this link: https://bit.ly/JustDario