Iran Goes Scorched Earth, Are You Invested For the Fallout?

“I feel compelled to speak today in a language that in a sense is new — one which I, who have spent so much of my life in the military profession, would have preferred never to use. That new language is the language of atomic warfare.” — President Dwight D. Eisenhower, 1953. 

President Eisenhower delivered these somber words during his “Atoms for Peace” speech to the UN back in 1953, and the words still ring true today. That year, the U.S. launched the Atoms for Peace program, which sought to help nations develop their own peaceful nuclear programs for civilian purposes. 

The goal was noble, perhaps naively so: spread the peaceful use of nuclear technology across the globe, and in doing so, prevent its use as a weapon. Eisenhower might’ve imagined gleaming reactors providing cheap power and medical isotopes to developing nations. 

Four years later, Iran signed an agreement under the program and established its nuclear program. A decade later, we even supplied Iran with a 5 MW research reactor and some highly enriched uranium fuel to go along with it. 

I’ll bet one thing he didn’t envision was Iran, decades later, using that same initiative as the launching point for one of the most dangerous geopolitical chess matches of the 21st century.

In the decades that followed, Iran’s nuclear program morphed from a Western-backed science project into a highly secretive, fiercely guarded ambition. Post-1979 Revolution, the Ayatollahs took over the levers of atomic ambition, trading white coats and chalkboards for centrifuges and hardened underground bunkers. 

Today, it has evolved into a lightning rod for war drums, and lately they’ve been beating harder than ever. 

A couple of days ago, we talked a little bit about the most recent escalation of the Iran-Israel conflict, each laying a path paved in destruction. 

Perhaps the most important point, however, was the seemingly numb reaction by the oil markets. Sure, crude prices jumped 8% on the initial news of the airstrikes, but that reaction feels muted compared to the scope of the situation. 

Iran is throwing everything they can at Tel Aviv, even deploying decoys in an effort to mask the location of their mobile ballistic missile systems. As the IRGC put it, “The missile attacks will be focused and continuous, and we have opened the gates of hell on the Zionists.” 

Despite the huffing and puffing, Iran’s nuclear program — the one that began peacefully 68 years ago — is a few bunker buster bombs away from total annihilation. 

This escalation has cracked open a long-simmering question: if Iran is cornered — economically, militarily, and diplomatically — does it go scorched earth? 

The Islamic Republic has the tools and the precedent. It could target Saudi Arabia’s oil infrastructure, as it did in 2019 when drones crippled the Abqaiq processing plant, temporarily wiping out over 5% of global oil supply in a single strike. Or it could rain missiles down on the UAE, whose oil-exporting infrastructure along the Gulf coast would be nearly impossible to shield entirely.

Personally, I’m not convinced. Even cornered and on the brink of collapse, we’re not going to see this kind of extreme response that would send oil prices rocketing to $150 per barrel overnight. 

Call me an optimist, but even Iran’s closest allies wouldn’t let them get away with that one. 

That’s why the more fearful rhetoric in the media revolves around the Strait of Hormuz — widely considered the jugular vein of the global oil economy. 

Remember, a fifth of the world’s oil flows through this narrow waterway, and Tehran has long threatened to close it in retaliation against Western aggression. A single Iranian missile strike or sea mine in the strait would also send oil prices soaring, never mind the insurance rates on every tanker brave enough to ply those waters.

But here’s where we throw a wrench into the doom machine: Iran can’t actually pull the scorched earth lever — not without consequences. 

Stop for a second, close your eyes and try to count how many times over the last few decades that Iran has threatened transit through the Strait of Hormuz. 

Take your time, because it’ll be a while.

Personally, I’ve lost count. It’s the go-to threat whenever Iran is getting pushed hard against a wall — and the market has grown weary of the boy crying wolf. Thirty years ago, we would’ve seen oil prices soar to unimaginable levels had this kind of fighting broke out. 

Today, oil prices only get an 8% bump for a day, then settle back into the low $70/bbl range. JP Morgan analysts noted that prices could top $130 per barrel if the Strait of Hormuz was closed, but quickly reiterated that oil is probably going to average $60 per barrel this year. 

Hey, even Beijing doesn’t want to pay $130 a barrel for crude. 

I’m not looking at Iran as the wild card this time. No, dear reader, this time the real twist of fate isn’t in how Iran responds, it’s whether the U.S. jumps directly into the fray. 

It’s not Israeli warplanes flying unfettered across Iranian skies that you have to worry about, it’s when President Trump hints that we’re not looking to kill Ayatollah Ali Khamenei… at least not for now. Is threatening the supreme leader with assassination the final tipping point? 

We’ve left the Eisenhower era of peaceful atoms far behind. What we have now is a nuclear powder keg, a Persian powder room of geopolitics, where every match strike matters. 

The stakes are enormous. But so are the signals. 

And if history teaches us anything, it’s that when tensions flare in the Gulf, smart money doesn’t run — it drills.