I think the sharpest point in your essay is its exposure of an ironic form of American self-display: if two U.S.-flagged vessels require large-scale military protection just to pass through the Strait of Hormuz, then this is not the restoration of freedom of navigation. It is a change in the cost structure of that order.
The market is still learning how to price this new form of structural risk.
@Leon Liao, thank you. The cost-structure framing is the part I think is going to age the best, and you have read it the way I hoped someone would.
"Self-display" is also a sharper word than the one I used. I went with "demonstration" because that is what CENTCOM called it in the briefing this morning, but the choreography earns the harder word. Two flags, fifteen thousand service members, more than a hundred aircraft, a destroyer screen, Apaches and Seahawks engaging six small boats inside the strait — none of that is what moving cargo looks like. It is what moving a headline looks like.
Trump's 60-day War Powers letter to congressional leaders on Friday is the verbal half of the same gesture. The convoy is the visual half. The audience for both is sitting at a US gas pump.
The piece does not push the cost-structure point as far as it should, so let me push it here.
Pre-war, freedom of navigation through Hormuz operated as a public good — Navy presence funded by the US taxpayer, consumed by every shipper at zero marginal cost, with no exclusion mechanism. Post-28 February, it is a club good — Navy operations funded by the US taxpayer, consumed by whoever is willing to register under a flag CENTCOM will escort, with the flag itself acting as the exclusion mechanism. The shift from public-good provision to club-good provision is the structural-risk pricing problem the freight curve, the war-risk premium, and the term structure of crude have not yet finished absorbing.
The next piece works through the maritime mechanics underneath the regime change — mine warfare, missile inventories, the 1987–88 Tanker War replayed with worse US equipment and a more centralised Iran.
I think the sharpest point in your essay is its exposure of an ironic form of American self-display: if two U.S.-flagged vessels require large-scale military protection just to pass through the Strait of Hormuz, then this is not the restoration of freedom of navigation. It is a change in the cost structure of that order.
The market is still learning how to price this new form of structural risk.
@Leon Liao, thank you. The cost-structure framing is the part I think is going to age the best, and you have read it the way I hoped someone would.
"Self-display" is also a sharper word than the one I used. I went with "demonstration" because that is what CENTCOM called it in the briefing this morning, but the choreography earns the harder word. Two flags, fifteen thousand service members, more than a hundred aircraft, a destroyer screen, Apaches and Seahawks engaging six small boats inside the strait — none of that is what moving cargo looks like. It is what moving a headline looks like.
Trump's 60-day War Powers letter to congressional leaders on Friday is the verbal half of the same gesture. The convoy is the visual half. The audience for both is sitting at a US gas pump.
The piece does not push the cost-structure point as far as it should, so let me push it here.
Pre-war, freedom of navigation through Hormuz operated as a public good — Navy presence funded by the US taxpayer, consumed by every shipper at zero marginal cost, with no exclusion mechanism. Post-28 February, it is a club good — Navy operations funded by the US taxpayer, consumed by whoever is willing to register under a flag CENTCOM will escort, with the flag itself acting as the exclusion mechanism. The shift from public-good provision to club-good provision is the structural-risk pricing problem the freight curve, the war-risk premium, and the term structure of crude have not yet finished absorbing.
The next piece works through the maritime mechanics underneath the regime change — mine warfare, missile inventories, the 1987–88 Tanker War replayed with worse US equipment and a more centralised Iran.
Looking forward to your read on that one.
Great framework. Look forward to.