It's deeper than you think, the U.S. is not at war with Iran

Just imagine the entire conflict in Iran is not actually being fully controlled by the decisions of world leaders, but instead by some men in suits in a boardroom. Just imagine that. Well, Trump just made a move where when you look into it, it kind of shows how close to the truth that might be. And it might also expose who really has the power to make decisions and how that's shifting in real time. At this point, none of us are strangers to the idea that a lot of the world's conflict has to do with economics. You have the four factors of production. Land, labor, capital, and entrepreneurship. Today, we're going to talk about land, which really just refers to natural resources. But we're going to take it a little bit deeper into how it actually turns into entrepreneurship or how things work in the world of finance. At the end of the day, the actions that countries take all comes down to incentives. how to get the most while sacrificing the least. It's all one big game. And right now, what is arguably the most pertinent aspect of this conflict that's happening in the Middle East is the situation that's happening in the Strait of Hormuz. The strait is responsible for the movement of 20% of the world's oil and a similar amount of the world's liqufied natural gas. and Iran is striking ships that cross the strait, essentially closing it down and halting a significant portion of global energy trade. And this is something that cannot go on for forever. We're talking about a situation here where trillions of dollars of global trade could be erased in a very short period of time. But there's a hidden hand in how all of this global trade over the ocean actually works. And it all has to do with something that you may have heard of before but might not have fully understood called Lloyds of London. Often referred to as just Lloyds, this is a marketplace where insurance is sold. It started in 1689 as a coffee house where ship owners and financeers met to ensure their voyages. And today it is a global insurance market where investors form what are called syndicates that ensure risks together. Essentially these investors pull all of their capital together to ensure shipments that are happening across the world. We're talking insurance companies, hedge funds, pension funds, and other institutional investors that come together to make sure that these shipments take place. You have hole and machinery insurance, which is mostly about the boat and the machinery on it that allows you to get things on and off of it, for example. And then you have protection and indemnity insurance. And this is about the people on the ship, for instance, as well as any other incidents that may occur, such as an oil spill, for example. Then you have to consider the fact that for a container ship, for instance, you have actual cargo that's on the ship. And so you need insurance for that as well. But what we're going to zoom in on today is another form of risk that happens when, for instance, you are shipping cargo through a specific kind of an area that might be a little bit more dangerous than normal. And this requires what is called war risk insurance. And this is what Lloyds is most famous for providing. If you're shipping oil, for instance, through dangerous waters, Lloyds is the place to go to get insurance. Let's talk about how insurance works and why this is so vitally important. Well, imagine that you have a shipping company and it owns a container ship worth $120 million. That ship is about to sail through the straight of Hormuz, which is now dangerous because there's missiles, mines, and military attacks happening left and right. If the ship gets destroyed, then your company could lose $120 million for just the ship alone, maybe $50 to $200 million of the cargo on the ship, and you might end up with some lawsuits and even cleanup costs based upon uh what happens after that, right? like let's say that leads to an oil spill in the ocean and now you're liable. Well, that's a huge financial risk and one that's most of the time not worth taking on. That's important. So, the shipping company is going to go to an insurance provider and say, "Look, if our ship gets destroyed or damaged during this trip, will you cover the loss?" And the insurer will agree, but only if the ship owner pays what's called a premium. And the premium is essentially just the price of transferring this risk from the shipper to the insurer. Now, in a normal situation, for instance, where there's no wars going on or you're traveling over peaceful waters, the insurer might charge.1% of the ship value. And so that premium would be $120,000 on that $120 million ship. And so the shipping company is going to pay that $120,000 for the insurer to take the risk. And this would be calculated per trip. Now, in a war zone situation, if the ship is sailing through a conflict zone like the Straight of Hormuz, well, the insurer might charge a little bit more. They might charge 2% of the ship's entire value. Now, we're talking $2.4 million on that $120 million ship, and we're talking about that for one voyage. So the problem right now is that uh tankers in the straight of Hormuz have been attacked and Iran continues to threaten ships that pass through. And because of this, shipping traffic has completely collapsed. And so insurers have raised premiums massively or even just canled coverage entirely in some cases. You see, insurance companies rely on probabilities. And when risk becomes unpredictable, such as having no idea what's going to happen next in a war, then insurers are going to refuse coverage. It's kind of like in the casino. If the edge is supposed to be with the house and you keep taking their money, then they're going to kick you out. But in this case, these insurers just can't be certain that they still have an edge. And without insurance, some of these ships cannot really legally sail anyways, which is why hundreds of vessels are now stuck waiting around in the straight of Hormuz. And the economic impact of this is massive. So what just happened here is that the US International Development Finance Corporation, which is a government agency, just raised its hand and said it will step in. Now, this is a publicly funded organization that operates under the executive branch of the United States and the goal is to promote economic development in other countries while advancing US foreign policy and national security interests. This organization is referred to as the DFC and they provide financing tools like loans, even equity investments and insurance. So now Trump came out and said, "Hey, we're going to go ahead and provide governmentbacked insurance to ships that are trying to get through the straight of Hormuz." And the idea here is to pair this insurance also with actual security from the US naval forces. And this is a key thing to point out because you kind of need both, right? You might have naval protection, but if you don't have insurance, then the risk might still be too high to be worth taking. Plus, like I mentioned before, there are legalities to consider as well. And obviously, you can have as much insurance as you want, but you might run out of people who are actually willing to take that voyage knowing that they might get attacked. So, you really do need both. By getting the DFC to step in and fill the gap where private companies have decided to back off, the US is kind of exposing a key aspect of global trade that often just goes overlooked. When an insurer decides that they aren't willing to provide insurance, they're essentially cutting off a portion of global trade. And you see this across several different types of insurance where if an insurer doesn't actually support uh or offer insurance to people, they kind of get cut out of the system through layers of maritime and international law. Insurance companies have positioned themselves as the financial choke point in international trade and the situation in the straight of Hormuz reveals this otherwise obscured reality. Now, the final piece of the power balance to think about here is that the US could also pick and choose whose ships they might actually be willing to ensure and protect as they make these voyages. We had a congressman in the United States come out and actually question the motives of this, pointing out the fact that about 40% of the exports out of the Persian Gulf are actually going to China. and he kind of questions whether or not President Trump is considering that when making this move or who he's going to allow this insurance to go to. Now, I'm not a financial adviser nor a wise sage and I highly advise that you don't take advice from a random guy walking around a park talking to a stick. I don't actually think there's any personal financial takeaways to get from this in particular. I think one of the biggest lessons to take away from this is understanding incentives and how the systems around us today really work. Another thing to think about is how markets often move before the rest of the world fully understands what's going on. Traders, insurers, and investors spend their time trying to price risk. And when the probability of disruption increases, those risks start getting built into markets. That means looking at things like oil prices, shipping rates, and insurance premiums, and how they can sometimes act as early warning signals for what can come next in the global financial system, in the economy, and really what moves actually might be made in the kinetic real world. As Donald Trump increased his rhetoric around Iran, we saw oil prices continuing to rise, signaling that something was actually going to happen. But I don't know, maybe I've completely lost the plot. What did I miss? What did I get wrong? Or how could I be looking at this differently? Let me know in the comments down below. And if you haven't already, you got to subscribe to my live show that I do with Ben Levit. It's called Memes and Markets. We go live every Tuesday and Thursday at 12:00 p.m. Eastern. We discuss topics like this and much more. We might even be live right now. So, check out the pin comment or the link in the description to join us live. I'm also going live on this channel this Saturday at 2 p.m. Eastern. So, be sure to turn on your notification bell so you can be notified when I go live. If you want access to exclusive videos where I'm talking about this kind of stuff and more, be sure to check out my Patreon or you can check out channel memberships, macro analyst channel members, get access to exclusive videos where I go further in depth and answer questions and you get access to a private Discord community. You can find that at the link in the description. I'm Keith D. I'm here to talk everything money and markets. And if you got anything from this at all whatsoever, be sure to hit that like button and subscribe. And until next time, peace.

📹 Become a Channel Member (Exclusive Videos): https://www.youtube.com/channel/UCAFqzhDwJd12pBDgdk-2GqA/join 📖 Or Join My Patreon (Weekly Newsletter): https://www.patreon.com/c/theinneroperator/ 🎙️Subscribe to Memes and Markets: https://www.youtube.com/@MemesandMarketsPod For a 1:1 conversation, book your paid consultation here: https://calendly.com/keithsmithspeaks All Sponsorship & Business Enquiries: keithdenterprise@gmail.com What if global conflicts aren’t driven only by world leaders—but also by financial systems operating behind the scenes? In this video, we break down the hidden financial infrastructure that makes global trade possible and how it’s being exposed by the current tensions in the Strait of Hormuz. As attacks on shipping vessels threaten one of the most important energy chokepoints in the world—responsible for roughly 20% of global oil and major LNG flows—insurance markets have become a critical factor in whether trade can continue. We explore the role of Lloyd’s of London, the historic insurance marketplace that underwrites maritime risk, and why war risk insurance is essential for ships traveling through conflict zones. When insurers pull back due to unpredictable war conditions, global trade can grind to a halt. Now, the U.S. International Development Finance Corporation (DFC) is stepping in with government-backed insurance and naval protection to keep ships moving through the Strait. This raises an important question: when private insurers refuse to cover risk, do governments—and the financial system itself—become the real gatekeepers of global trade? We also discuss how markets often signal geopolitical events before the public fully understands what’s happening, and how things like oil prices, shipping rates, and insurance premiums can act as early warning indicators. This video explores the incentives, financial mechanisms, and unseen power structures shaping global conflict and trade.