Trump Warns of New Strikes on Iran | Balance of Power: Early Edition 3/13/2026
Speakers
Summary
- The US and Israel have hit over 15,000 targets in Iran over 14 days, with the Strait of Hormuz remaining closed to US-flagged vessels.
- Bloomberg Economics estimates oil could reach $164 per barrel if disruptions in the Strait of Hormuz persist for three months.
- Global strategic petroleum reserve releases (400 million gallons) will only cover roughly 20 days of supply lost from the Strait.
- The Pentagon has designated AI firm Anthropic a supply chain risk due to the company's demand for ethical safeguards, opening the door for competitors like Google, OpenAI, and xAI to win defense contracts.
- Congress is preparing a defense supplemental bill expected to exceed $100 billion to replenish munitions, alongside a proposed 50% increase to the broader defense budget next year.
- The EU is targeting 50% of defense procurement from internal suppliers by 2030, heavily favoring companies like Sweden's Saab that maintained continuous manufacturing capacity.
- AI-driven cyber warfare is escalating, creating severe vulnerabilities for private sector critical infrastructure (hospitals, energy, finance).
Trade Ideas
We have estimated if the disruptions persist for closer to three months, you can see oil well above $150 a barrel, and we estimate close to $164. Government interventions like waiving the Jones Act and releasing SPRs only provide a temporary 20-day cushion. If the conflict drags on, the physical supply shock will overwhelm these mitigations, driving crude prices and major US oil producers significantly higher. LONG. The market is currently underpricing the duration risk of the Strait of Hormuz closure. Backchannel negotiations successfully reopen the Strait to all vessels, or a sudden ceasefire collapses the geopolitical risk premium in oil.
As far as the adaptation to another provider, another technology, say OpenAI, xAI, or Google, which this week has been reported on to provide unclassified work for the Pentagon. Anthropic's refusal to allow its AI to be used for autonomous weapons or surveillance has forced the Pentagon to phase them out. This creates a massive vacuum for lucrative DoD AI contracts, which less-restricted tech giants like Google will absorb to build the military's AI infrastructure. LONG. Defense contracts provide a massive, sticky revenue stream for AI monetization that Anthropic is voluntarily abandoning. Internal employee pushback at Google regarding military contracts (as seen historically with Project Maven) could force the company to step back, leaving the market to private players like xAI.
We think this number will be north of 100 billion... Congress is preparing for a supplemental request from the Pentagon to sustain what is happening in the Middle East. The US has already struck 15,000 targets in two weeks, rapidly depleting existing munitions stockpiles. A $100B+ supplemental package, combined with Trump's request for a 50% baseline defense budget increase, will flow directly to the prime contractors manufacturing these weapons. LONG. The sheer volume of ordnance expended guarantees years of backlog for major defense primes to restock the military. The supplemental bill gets tied to unrelated partisan issues (like farm aid) and fails to pass through congressional reconciliation.
The EU is targeting 50% of defense procurement to be from EU suppliers by 2030... meeting that goal requires production capacity, and that is where Sweden stands out. Many European nations dismantled their defense manufacturing during peacetime. Because Saab continuously invested in R&D and maintained its production lines, it is uniquely positioned to immediately capture the massive influx of localized EU defense spending. LONG. Saab has the actual physical capacity to meet the EU's aggressive rearmament mandates, giving them a monopoly-like advantage over lagging regional peers. Major European economies (France, Italy, Spain) fail to meet their defense spending targets due to domestic fiscal constraints.
We see attackers using AI... More and more of that infrastructure is in private hands. That risk is shared. Nation-state actors and hacktivists are weaponizing AI to attack critical infrastructure. Because hospitals, energy grids, and financial systems are privately owned, these corporations will be forced to drastically increase their enterprise IT budgets to procure AI-enabled cybersecurity platforms. LONG. Geopolitical kinetic warfare is expanding into corporate cyber warfare, making top-tier cybersecurity software a mandatory, non-discretionary expense for the private sector. High valuation multiples in the cybersecurity sector could lead to multiple compression if enterprise IT budgets broadly contract.
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