Here is the story I am watching this week. Hormuz passages are increasing according to satellite monitoring, AIS tracking, and sources on the ground. Iran is formalizing their control over the Strait and has announced it is open to Iraq as well as “essential goods”—a vague rule whose implications aren’t yet clear.

This will provide a lot of hope to the market.

However, the war is simultaneously escalating towards the permanent damage of energy infrastructure throughout both Iran and the gulf countries. From the damage over the past weeks: ~1.5% of oil refining is offline as well as ~2% of global gas production and ~3% of LNG. While this damage is spread out between the last two weeks, attacks are increasing sharply as Trump makes good on his threats towards civilian infrastructure and Iran makes good on their promise to respond in kind. Iran claimed responsibility for today’s strikes on oil, gas, and petrochemical facilities throughout the region which hit facilities in Israel, Bahrain, Kuwait, and the UAE. Iran has put out a statement today calling these strikes “phase one” with phase two to come if Trump continues strikes on civilian infrastructure: “If the attack on civilian targets is repeated, the second phase of this operation will be much more devastating and widespread.”

This is a completely separate path to creating energy shortages. One can easily imagine a scenario where investors, equating the closure of Hormuz with energy shortages, would treat the reality Hormuz slowly opening as the relief they have been waiting for, all the while the escalating strikes on GCC energy infrastructure starts to limit global supply meaningfully and for much longer.

Indeed Iran may be viewing it this way: damage to the global economy harms Trump’s ability to wage war. If Trump has given them an easy and defensible pretense for striking GCC energy infrastructure directly, they don’t even need to shut Hormuz to inflict the damage desired. They can save face in front of an already-sympathetic world by doing a phased re-opening of Hormuz while doing the same or greater damage to the US’s war machine through direct strikes on the GCC.