Geopolitics: Do We All Die Before RSI

BLUF: My base case is 1] Trump escalates Iran war after Midterm Blue Wave - with heavy Israel led bombing as a base case with no ground invasion 2] Trump does deal with UAE - MGX leads OpenAI $1.2-1.4T valuation funding round with US govt participation in exchange for prioritized access to interceptor missiles that get diverted from Ukraine 3] I like XMR, BTC spot long. SOL, TAO perp shorts. and am looking to buy post midterm put options on extremely expensive leisure stocks (ABNB, MAR, etc)

I do think macro gets worse for a bit. I don't think AI melts down because (per my last article) AI will elicit a policy response. Given the context a deal with the UAE for interceptors, in exchange for leading OpenAI's round would be the most linear "Art of the Deal" move. Warning: long article. You might want to just wait for the 3 minute video and go live your life. Foreshadowing:

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On Friday we saw a large up move in the VIX (+20%) along, with stocks down 2%+, oil higher 3%, United Airlines -5%, Lockheed +3.7% - with a glut of both Iran and Ukraine headlines. Pressure is continuing this weekend on Trade XYZ with oil bid and stocks off 1%+. Friday saw Neolabs and bitcoin miners who pivoted into AI down badly - with Coreweave -11% and IREN -11%. Whereas previously tech was viewed as non-cyclical, increasingly it looks to be short power prices.

I wanted to answer my own questions about the situation in Iran, and Ukraine and provide my analysis here

Q1: Can you give me a basic timeline about what the hell is going on? Why - specifically - are people freaking out?

• **Non Macro Bear Pill: it's all just Anthropic Q3 delayed reaction. Anthropic Q3 was Wed night showing decel to 45% QoQ growth viewed by many as disappointment. **the argument is that genius level model capability can't accelerate revenue. If you have Fable 5.1 and you get a decel what incremental capability causes an accel? Given that Nasdaq traded *higher* within 24h of Anthropic ARR announcement and only truly imploded on Geopol acceleration. I think @citrini getting bearpilled is also shaking sentiment as previously Semi Analysis was the big bull

Possibly just a positioning unwind

Goldman Sachs VIP index comprised of 13-F popular fund holdings has been getting smoked versus S&P 500 indicating pain in crowded longs

Shkreli highlighted that VAR AI fund might have blown up. They dropped 44% in July so were already in pain. They owned $20.5b of calls on AI stocks (GOOGL, AMZN, NVDA, BE, NBIS, CRWV). This is a rumor but speaks to possible crowding. With Nasdaq still +16% ytd passive players might degross AI hedge fund exposure as Leopold (poster boy of AI funds) biggest remaining position (Anthropic) is now perceived as under pressure

With that said: War Timeline since Sept:

• Sep 3-4: Houthi ground offensive in Western Yemen

• Sep 10: Houthis take port of Mocha. Drones launched from Iraq hit Saudi East West oil pipeline and it shuts

• Sep 11: Houthis take Perim Island and Yemen's Red Sea Coast sending Brent to $104-$108

• Sep 15: House votes, for the third time 220-204 to end Iran war. Senate hasn't passed its own version. Ukraine starts escalating via an attack near Lyman

• Sep 16: Houses passes the Graham Act (Russia and Iran sanctions) 262-159

• Sep 18: Trump signs Graham act which kicks in Oct 18

• Sep 19: Houthi missile hits Riyadh, catching an Aramco fuel tank at the airport on fire

• Sep 22: East west pipeline hit on Sep 10 restarts

• Sep 23: bulk Carrier Cape Dao is hit near Hormuz and later sunk October 14

• Sep 25: Iran offers 7 day plan to open Hormuz and restart Nuclear talks in exchange for US removing blockade, waiving sanctions and agreeing to ceasefire including Lebanon

• Oct 2: US sends its third aircraft carrier with 10k soldiers to the Gulf

• Oct 5: Saudi backed forces in Yemen claim to retake Mocha with 100 jets. Houthis deny it and WSJ (Oct 17) reports that Houthis still hold the coast

• Oct 8-9: Trump pledged no strikes on Iran before midterms. Trump announces deal w Russia to supply diesel to world markets, lifting sanctions.

• Oct 10: Houthis hit Riyadh airport, killing 13, and wounding 300. Airport is still closed. Trump declares "energy ceasefire" btwn Russia and Ukraine that Russia did not confirm

• Oct 14: Cape Dao is sunk (previously attacked Sep 14) - Spacex military satellite services (Starshield) in Ukraine is restricted (in motion speed cap). Ukraine claims 277 sq km near Lyman (per operation started 1 month prior)

• Oct 15: Houthis hit Yemeni palace in Aden, killing 5. EU gulf summit in Riyadh is postponed. Tanker is hit off coast of Romania, 7 missing. Trump foreshadows using "mother of all bombs" after midterms. Calls Zelenskyy "more difficult to deal with than Putin". Zelenskyy says "we're done" and resumes refinery strikes. SpaceX Starlink access is restored

• Oct 16: Trump waives Graham Act's Russia tariffs and sanctions 2 days b4 deadline. Iran says it has rebuilt its air defenses and says it expects to be attack. Putin says strikes on Ukraine will continue and he won't return border territory

• Oct 16-17: Russia hits Ukraine's power grid. 15 facilities

• Oct 17: WSJ reports Iran is giving Houthis targeting help. Indian airlines cancel Saudi flights until Oct 24

• Catalyst calendar:

• Oct 26-29: Saudi FII investment conference (ppl already cancelling)

• Oct 27: israeli elections

• Nov 3: US midterms

• Nov 4 - January 3: Danger zone. Democratic House/Senate cannot block a strike until it is seated.

Sources: Al Jazeera, NBC, CNBC, White House, NPR, CNN, Euronews, Bloomberg

Q2: Is the Nasdaq actually exposed to war?

Answer: yes. There is a story that war is good for stocks. More fiscal outlay. Greater defense spend. That story is not showing up in correlations right now. Oil and the Nasdaq are the most inversely correlated they have been since 2006. Higher power prices puts stress on power intensive data centers

The Nasdaq is the most inversely correlated to oil that it has been since 2006

There is currently a 63% chance of a Democrat sweep in Midterms per polymarket. Democrats want moratoriums on data center builds, and oppose AI. Higher gas prices lower Republican political approval. Trump promised no foreign wars in his campaign and reneged, making him look like an Israeli puppet.

Korean stocks - which are a big bet on the global AI datacenter buildout - are down 18% this month. Korea is a large energy importer. 57% of Korean electricity is from imported coal and gas - and prices are +37% since Feb. However SK Hynix CFO Woo Hyun Kim has stated "we source LNG through long term agreements which keep price fluctuations limited and impact on our business will be limited." and have their own dedicated LNG power facilities. There was no mention of energy on Samsung's last earnings call - and in April Park (CFO) assured UBS that they are 'working with the government' to maintain a stable power supply. Shipping oil from the Middle East to Asia has become explosively expensive ($1.5b+ per month)- so the more realistic flow through is dampened retail investor sentiment

Shipping oil to Japan now costs 33% of a barrel of oil. Tankers are earning $800k+ a day vs $58k in 2025. Korea paying potentially $1.8B a month in shipping costs

The credit risk people are worried about in DataCenter world is OpenAI. UAE (MGX Group) was rumored to be a $10b anchor for the $30b round. We'll get into that in later sections

Q3: What are energy a market pricing in about the trajectory of the war(s)?

*Things got much worse this month w de-escalation by 2028 *Oil futures price that the war's impact on Energy will be mostly mitigated by 2029 but over the past month the likelihood that the war drags on through 2027 has been substantially elevated (see the kink btwn the light blue and dark blue lines below). Dec 2028 brent is still +$12 vs the pre war values, so there is a lasting impact priced. Dutch TTF natural gas - which is the relevant metric for European power prices has also surged in the last month, with some respite priced after 2028.

Limited long term inflation impact in the US. UK and Europe dicier.** **Inflation and gasoline imply an acceleration in gasoline / energy year over year inflation into January of 2027. However, 5 year US breakevens (which measure projected long term US inflation) are about 2.4% - well below the 4.9% 5 year US yield in part bc the US has substantial energy production. UK Breakevens are far more concerning (3.7% with a 4.97% 5 year). Japan has the least 'real yield' with 2% 5 year bonds and 2% anticipated inflation.

Simply put - energy markets and inflation expectations don't anticipate a multi year war/ inflation spiral (yet)

near term inflationary impact of war gets worse then is chill by July 2027

Defense analyst earnings expectations have not yet caught up with bullish price action. Lockheed stock has lagged the S&P over the last year by 3%. So energy markets are somewhat isolated in their reaction so far

aggregate earnings revisions for next year have flatlined

Q4: What is the context with Israel?

Due to Democrats base case Midterm victory, and the reality of the long term outlook of the US cutting military support - the incentives strongly align for short term joint military action btwn the US and Israel after midterms targeting Iran. Per Joe Kent - Trump's counterterrorism director who resigned, the Iran war started because of "pressure from Israel and its powerful American Lobby". Netanyahu had lobbied Trump for months prior to the war. CIA Director John Ratcliffe called the scenarios Netanyahu painted "farcical". Trump went in anyways.

Recent quotes have been hawkish. Trump has said, "by annihilating Iran we've created peace in the world. With Iran, I don't think you could ever have peace." He told the UN general assembly that he will "never allow Iran to have a nuclear weapon" and that he was avoiding ground invasion "because of the election"

The Turn Against Israel

There is strong evidence that the US democratic party has swung hard against Israel and disillusioned Trump voters are joining them

• AOC: stated in April she will oppose all future military aid to Israel, Iron Dome included. She will not send taxpayer money to a government that ignores international and US law. "I have not once ever voted to authorize funding to Israel and I never will". Tlaib, Omar, Khanna - concur

• Sanders: called for US funding for Israel's missile defense to end

• Newsom: the US should "reconsider" its military support for Israel. Citing Thomas Friedman, he said Israel could "appropriately" be called an "apartheid state". He walked this back later (saying he only doesn't like Netanyahu Israel, which is the one currently in charge) but then in October noted that US military aid to Israel "has to be conditioned"

• Mamdani: called Netanyahu a "war criminal" and "architect of a horrific genocide against the Palestinian people".

• In April arms sales votes, Forty Senate dems voted to block arms sales to Israel

• Pew found that 80% of Democrats and Democratic leaning independents viewed Israel unfavorably in April 2026, up from 53% in 2022

• Nick Fuentes and the far right Groyper movement frequently cast Trump as an Israeli puppet and are telling followers to vote Democrat as punishment. 28% of republicans agree with the statement "The Jews have too much influence" per the ADL, which is virtually identical to Democrats.

• Kanye West who famously aired an advertisement with a link to his Swastika T Shirt labeled - HH-01 - which stands for Heil Hitler recently sold out SoFi Stadium with $18 million of proceeds. His June 6 show in the Netherlands sold out - with more than 500k people trying to get in the pre-sale. Kanye is obviously a great rapper. But this wouldn't have flown 20 years ago. I believe this is evidence that extreme anti Israel rhetoric is becoming popular / normalized.

Greater Israel and the Kushners

Realistically, the window after the Midterms and early January is Israel's last chance to engage in extreme expansionist military policy with US support.

• Clearly the current Israeli administration is hawkish and prone to war.

• The concept of "Greater Israel" implies that Israel should annex Gaza, the West Bank and - in some versions, Jordan, Lebanon and Syria.

• Netanyahu gave an August 2025 interview where he stated that he was "absolutely very attached" to the Greater Israel vision. Saudi, Jordan, Qatar, Iraq and the Arab League all condemned the interview

• Netanyahu was close to Charles Kushner (Ivanka's husband's father) for decades. Kushner has heavy investment in both Israeli banks and real estate. Jared Kushner did Q&A at Harvard in 2024 where he said Gaza's "waterfront property" could be made "very valuable" if it people were moved out and it was "cleaned up".

• Since Feb '25 there has been major emergency delivery of $19.6B of weapons to Israel bypassing congressional approval. Most recently, $2.8 b worth of bombs (approx 40,000 2k pound bombs and 20k MK 84 bombs). Putting this into context - the WW2 fire bombings of Dresden was 3,900 tons and Hamburg 9,000 tons. So this is ~10x the firepower of that. Israel is heavily armed and would be ready to go for months of heavy bombing post Midterms

Alternative Timelines

Assuming that the Israeli Lobby has substantial sway over Trump foreign policy, the risk reward for waiting to strike is quite bad. The longer Iran has to rebuild its air defenses, the harder the war is. Israel has heavy bombs and Netanyahu is still in charge. Without military action he loses momentum when he needs it most to stay in power. Democrats can cut annual aid to Israel and would have an easier time doing so without an active military theater. Congress can shut down the 10 year aid agreement. The tenth year of the aid agreement comes for renewal in 2028

Q5: Is there evidence of consumer demand destruction from high energy prices so far?

The simple summary is "absolutely not, travel has been extremely strong despite high fuel prices and the freak out has only hit airlines so far".

people paying peak EV to EBITDA multiples on travel names and forecasting 10%+ rev growth next year

• Hotels have been in beast mode with extreme business strength. Marriott showed up to BoFa conference and said non stop bullish things - "consumers across demographics are prioritizing travel. see it across every age group. 7-8% revpar growth with group bookings inflecting. more franchise agreement in 1H than prior 68 years." Middle East was only down 12% in July, about consumer travel demand in September and their stock has been up only since. +50% over the last year while Hilton is +36%. Everyone sounds great on business travel. Airbnb beat with mid teens growth in August then spent full Goldman conference rambling about their AI transformation. Whitbread printed Oct 13 posting +5% London revpar, and +10% german ebitda growth - driving stock ~+4% since

• Cruise is holding up - indicated ppl calmed down from start of year. Carnival printed Sept 29 and have 2027 half booked already, with record revenue per available berth day. Booking disruption in the sprin have "rebounded meaningfully"

• Airlines sounded great (but turmoil starting to hit them): Delta (printed Oct 9) grew 16% adjusted / +21% gaap, keeping pretax profit flat year on year despite $1.6b of fuel costs. "The week after labor day was the highest corporate sales week in our history. We see no cracks in demand for the fourth quarter. The economy is really strong" . Note that airline mgmt are famously complete pelicans re: war stuff. Delta is -8% since that print.

Marriott investors are paying peak multiples for a corporate / conference driven growth story, along with strong consumers and the meme of Online Travel Agencies being ended by AI

Q6: What is consensus around war resolution timeline both from prediction markets and major think tanks?

• No US strikes on Iran - the market has an 80% chance there are no strikes before midterms but only a 32% chance by the end of the year (meaning escalation is likely after midterms). Reuters has reported that Trump is considering intensifying military action. Washington Post / International Crisis Group have called the war a stalemate that Trump wants out of. Meanwhile an IRGC spokesman pointed out that attacks *before* Midterms are possible

• Ukraine ceasefire agreement: - 13% chance by year end. 60% chance by next year (more or less flat over time). Lavrov has said "there will be no ceasefire", explicitly. CSIS / Carnegie view the diesel deal and the Graham Act waiver as favoring Russia to wait for more concessions before a ceasefire

• Netanyahu out by Dec 31: - 37%. was at a high of 75% in July. Polls show neither bloc reaching 61 seats - and deadlock means he stays.

Q7: What is up with the Houthis, Saudi Aramco and escalation there?

Saudi Aramco started selling off this week despite higher oil prices due to the Houthi rebels hitting. Trump has indicated "the Houthis are behaving very badly" and is weighing whether to intervene. Technically Trump pledged not to hit Iran, not the Houthis. Saudi output is down 31% ($3.3 million bbl a day) since the war began with 40% of capacity idle.

Hormuz is shut so Saudi exports run through one pipeline to the red sea. This pipeline was already shut once (Sep 11-22). Another outage could take out another 4.5 million BBL a day (4% of world oil supply) off the market. Still the high prices of oil are preventing Aramco equity from falling too much bc if capacity comes back online it'll make a killing.

Now that Houthis hold the Yemeni side of Bab el Mandeb, and are attacking tankers, diverting cargoes for Asia through Suez take 20-25 days. Yesterday, two missiles landed near the Aden airport.

Saudi is running a 4.9% of GDP deficit with 3.6% projected for 2027, with a declining GDP in 2026. The problem is not the price of oil, but rather the declining output. This isn't really a credit situation (5 year CDS is 69 bps). But it's still pretty bad. His flagship investor conference Oct 26-29 is facing cancellations. PIF has already cut spending and is reallocating to domestic investment. NEOM has been scaled back.

Data center investments are still notably on track. Saudi's data center champion Humain says it's on track for 250 MW of data centers by Q4 and 1.7 GW in 2027. It's targeting 6 GW by 2034. The spicy part is that its issuing equity to fund this. Humain wants to list in both Riyadh and New York with advisers saying that the PIF "explicitly wants portfolio companies to reduce their draw on the sovereign". The question is of course if US data centers are already trading like death how are middle eastern data centers under threat of physical attack going to trade (gulp). Executives are running around trying to sell a majority stake - we probably hear some news on this in late October.

MBS also promised Trump $1T of US investment - which seems much harder with less oil revenue. But the Petersen institute has pointed out this is political theater and basically impossible to track/ totally unenforcable.

Given the fact that Saudi wants to sell equity in the US for its data center business, it is certainly aligned not to let CoreWeave and Oracle go into free fall. But it's also explicitly trying to raise external capital so doesn't seem to be strong hands or a possible buyer for multi trillion dollar AI lab rounds - especially given that a Saudi OpenAI engineer was arrested for planting a recording device in their office. My take: this is not a source of funds. If anything, it's a risk.

Q8: To what extent do these considerations affect OpenAI's funding rounds? Or is this a power squeeze? Or unrelated?

OpenAI is trying to raise another $30B at 1.4T. Variational OpenAI perps were trading at $1.7T prior to the sell off and now are down to $1.4.

The Softbank $SFTBY ADR dropped 10% Friday as Masa is in talks to spend $30 billion on Allied Universal. Allied has 770k employees, makes defense robots and also guards data centers. Over the past year, Softbank has lagged the Nikkei by over 50%, it's funding itself with Junk debt and its 5y CDS is now at 4.2% a year (20%+ of default) . It has $65B in OpenAI. This is on top of a pending $5.4B bid for ABB robotics. The new Vision fund Masa is trying to raise would lift these extravagant purchases off Softbank's balance sheet.

The good news. Vision fund 1 is +$29b and Vision Fund 2 which has the OpenAI is +$20.5b. The bad news - at current vol, those gains could evaporate quickly.

Son is seeking up to $100b from gulf investors, with primary leads being MGX and G42. However these investors are also directly considering investment in OpenAI. MGX recently closed $49b above its $45B target and aims to add $10B a year. Ali Osman who runs AI investments thinks the generative AI market hits $700b within 5 years (far above other analysts) - which would support a big bet on OpenAI .

When the war first started - initially there was concern there'd be curtailed investment. But there hasn't been so far. Global SWF has done some work on the topic, and thinks deployment in 2026 out of the Middle East and North Africa is projected to be $136b (2nd best year ever). The flip side is that Kuwait and Qatar are now in budget deficits which could mean forward pressure on Kuwait's fund (KIA) or Qatar (QIA) - dropping sector assets for the first time since 2015. But Kuwait and Qatar are not the funds in talks with OpenAI and Softbank at least publicly.

The bleak thing is that bankers have moved out of the region and the IRGC (Rezaei) is threatening to blow up AWS facilities in the UAE and Bahrain if Iranian infra is targeted.

The UAE is the most believable channel for Trump to stop the AI contagion to Oracle/ Coreweave / Softbank and other Neolabs by ensuring funding for OpenAI. UAE's MGX has already expressed interest. Iran has hit the UAE, which has no treaty with the US - so it needs American interceptors which are in high demand. The war so far has chewed through 40% of US THAAD stocks and 2/3 of its Patriots. So supply is scarce - and can be used as leverage. So far the UAE has ordered $10.75b of emergency air defense this year - which is directionally close to the amount required to lead a $30b round for OpenAI. The American Dhafra base has US troops stationed there so it optically doesn't look like a bailout. So interceptors in exchange for stabilizing tech. The art of the deal

On July 10, the Commerce Department (BIS) upgraded the UAE's export control status to allow it access to unmanned aerial vehicle programs, and put it in A:5 - the closest ally tier. Which allows military access to satellites and spacecraft "in recognition of the UAE's status as a US Major Defense Partner and its support in ... Operation Epic Fury". In the same document it is noted that "The UAE has reaffirmed its commitment to the investment commitments in the framework including the commitment to matching investments in the U.S SI digital infrastructure buildout"

The big danger of the situation is power. With extended conflict - you risk problems with the electrical grid. Virginia data centers are on the PJM grid which is already maxed out. Data centers drove 38% of PJM auction costs. There's a turbine shortage with multi year delivery delays. And Oracle might have to put up $7b of guarantees for its data center in Wisconsin to assuage regulators. Oracle has said they 'pass costs through to customers' and - per my earlier CoreWeave article, there's some wiggle room due to high inference demand and greater efficiency on Vera Rubin.

The optics of strained electric grids in winter, in a war, for making AI slop videos isn't ideal for the data center buildout which requires cooperation with local regulators to move quickly enough

Q9: Okay. Can we just talk about Ukraine now and go back to our weekend

Ukraine 2030 bonds have sold off 15% since their July peak

Republicans including Ted Cruz are mad about Trump's diesel deal. "A US sanctions blackout, easing pressure on the aggressor - financial rewards for Putin - all of this only encourages him to keep attacking" Zelenksyy said. Meanwhile Kirill Dmitriev of Russia's economic team tweeted it was a "Truly historic moment". Zelenskyy indicated that he thinks Trump will soon lift even more sanctions on Russia

Zelenskyy has followed up that the reported slowdowns on Starlink "seem deliberate" - and last night Russia attacked Ukraine's power grid targeting 15 power facilities in a likely attempt to cause a blackout before winter.

Things are pretty bad between Trump and Zelenskyy. Trump said, "I suggest they get a new leader who can make a deal".

On one hand, this is likely political theater. Trump wants to blame high diesel prices on Zelenskyy and be seen fighting for American people by punishing him into midterms.

But theater or not I think this is a pretty big deal. Hegseth straight up didn't go to the European Defense Contract Group meeting. The Pentagon budget eliminated Ukraine aid. Only 30% of Ukrainians see the US as a reliable ally. Europe and the US are increasingly politically fracturing which could increase required EU defense expenditures when budgets are already strained and sovereign spreads are beginning to move in a bad direction.

France is now rioting while their sovereign bonds blow out vs Germany's. Further breakdown in US/ European relations is bad for an already dicey situation

What's the Trade

Market correlations tell us that if you're long tech you're probably betting against geopolitical escalation at the current moment so it could be prudent to add some risk-off bets

Travel names running hot on bullish conferences and surprising demand in wake of existing geopolitics are likely vulnerable. $MAR Jan downside is one of many potential options trades where there's minimal consideration for a year end military escalation.

MAR and other travel complex put skew does not price obvious escalation despite prediction markets and politicians statements placing high odds on such a thing going into the end of the year

The preferred trade for me in crypto risk off at the moment is BTC (spot) vs SOL (perp). It realizes negative correlation to stocks, and positive correl to oil. I think Robinhood chain wars and everyone competing simultaneously for on-chain stocks, HYPE/BNB likely winning in commodities trading (which will accel) inability of SOL fees to break $1m daily fees - and BTC's relative 'store of value' narrative which has been articulated by PTJ who is also risk off. Just makes SOL the least sexy 'fee based' coin for now

My second favorite trade is XMR (spot) vs TAO (perp). XMR vs TAO has realized +.25 correlation to oil over the past 3 months. More relevantly, I think Pearl will get an exchange listing and suck liquidity out of TAO. In terms of attention and controversy it can't hurt that Pearl is based in Tel Aviv. I don't think XMR will move with macro and will be more/less indifferent to a Pearl listing from a liquidity standpoint and you have the additional downside convexity of TAO getting caught up in AI panic sell offs with Venice also competing for AI attention.