TOPSHOT – Smoke and fire rise from the site of airstrikes at Mehrabad International Airport in Tehran on March 7, 2026. Israel said on March 7 it had launched “broad-scale” strikes on targets in Tehran, as the Iranian state broadcaster reported an explosion in the western part of the city. (Photo by ATTA KENARE / AFP via Getty Images)
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Let us take a look at the U.S.-Iran war and decide how to play this sorry situation.
You can fret, you can shout, you can cry, but the bottom line is that there is zero we can do about any of this. Except that we can place our investments in a way that supports a positive outcome. The market is the backbone of the West, and its efficient operation pays many of the bills. Therefore, it is our job to provide risk capital to keep the machine well-oiled and spinning.
So, we can be sure that if we can make a profit from this situation, it’s for the good. (Unless you don’t believe in freedom and markets and you are in the “money is the root of all evil” brigade, in which case you will see it as evil profiteering.)
My model is that the U.S. only has three alternatives in this conflict:
Siege: High Probability
Siege appears to me to be the obvious route. For all the uproar, the outcome of a siege is not so terrible for the U.S. Everyone will be bored of the news flow soon enough. Meanwhile, oil is going to be routed around Iran’s choke points. With the loss of the Strait of Hormuz chokepoint, what then for Iran, sitting under the black cloud of the U.S. military?
With the midterms finally balanced, the chronic impact of a siege might make alternative plans seem possible, but the only one that has a chance of being popular is declaring victory and running away, which is unlikely to work this time around.
Run Away: Low Probability
It would certainly be newsworthy if the U.S. disengaged. The resulting chaos would be unlikely to de-escalate the situation, and the U.S. would carry the can anyway. The resulting situation might even force the U.S. to come straight back if an emboldened Iran decided that was a green light to lash out.
It would also mean that it was only a matter of time before Iran became a nuclear state – and then what?
Invade Iran: Low Probability
A ground war makes perfect apocalyptic sense when it comes to the vicious logic of war. However, there is no sign that 150,000+ U.S. soldiers are at the ready. What’s more, that plan would already be in the price of the military contractors, and while they have spiked recently, they haven’t hit the levels you would expect if the U.S. were going to try to conquer Iran.
Setting up an invasion of that scale takes weeks of advance warning, and the cat would already be out of the bag. A ground war would also likely sink the Republicans at the midterms. We will hear it coming if a land war is on its way. So far, we don’t hear it.
However, there is another alternative.
Invade by Proxy – Yemen: Medium Probability
A ground war by the Saudis against the Houthis, with U.S. involvement, is the kind of conceivable escalation that could happen next. The reasoning would be to secure alternative shipping routes for Gulf oil.
The idea would be to fix the Houthi problem once and for all, which has been a festering, Iranian-funded abscess for years. It would show Iran that a ground war might not be unthinkable and demonstrate that the U.S. is NOT powerless.
What Does This Mean for Investors?
So, what does this mean for the markets, and us bystanders, in this awful situation?
In a nutshell, it means the simplest position is: long U.S. assets, which is the same as long U.S., period.
You can tinker with gold and bitcoin and certain stocks, but you may as well buy the S&P 500, because the die is cast.
What is the dice game? America’s fight to remain top dog.
The Trump administration is bringing this to a head. This administration is precipitating a “put up or shut up” moment, both economically (with China) and militarily (with Iran). The market must be successful, cannot be allowed to crash, and must continue to grind on up.
In any event, the U.S. won’t be humiliated before President Xi Jinping’s visit to the U.S. on September 24, so you can expect plenty of window dressing until after that’s happened. And I get the feeling a fireworks display will be on the cards.
That fireworks display, if there is going to be a big one, will be in Yemen.