No one knows how the Iran conflict ends. Two scenarios: de-escalation or escalation. De-escalation leaves Iran in control of Hormuz, creating a permanent threat and strategic disaster for US deterrence.

Argues that having started the war, it's better to escalate fully to force regime surrender for a political/strategic win, despite the risk of oil at $150-$200 and stagflation.

The proposed full escalation involves troops on Kharg Island and islands near Hormuz, bombing Iran, and protecting allies with missile defenses. This would lead to oil at 120-140, stock markets lower, bond yields higher in the short run, but achieve the objective in ~2 months.

Criticizes the blockade as a 'half-baked escalation' and a 'game of chicken' that Iran wins because it can suffer longer. A blockade strangles revenue but doesn't force surrender, leading to higher oil, falling stocks, higher yields, slower growth, and higher inflation without achieving results.

Troops would be on islands, not going into Tehran. The combined strategy would strangle Iran economically and militarily, leading to regime surrender/collapse.

Reiterates that leaving the war unfinished is a strategic disaster for the US, Europe, and Asia, as Iran would have a permanent chokehold on 20% of global energy.

Starting the war was a mistake. The economic impact is biggest in Asia (price and quantity shock), then Europe (price shock), and least in the US (net energy exporter).

To maintain credibility and deterrence against foes like China, the US must finish the job despite the cost. The biggest beneficiaries of removing Iran's chokehold would be China and Asia, as they are the largest oil consumers from the Gulf.

The current Iranian regime is more radical than before. A regime that follows national interest rather than fanaticism, even if autocratic, would be better for Iran and the world.

Argues the regime has been a curse to Iranians and has created failed states across the Middle East. It should be in the global interest to neutralize it.

Impact on growth and inflation is least for the US. With de-escalation (ceasefire but Iran controls Hormuz), oil would have a floor around $80+, not returning to $60. This causes some global inflation and growth slowdown, but not a global recession or unanchored inflation.

Cites the April tariff episode: markets forced Trump to blink, averting a recession. Before the war, the US had tailwinds: monetary easing, fiscal stimulus, strong confidence, and the AI boom.

The conflict won't be over by mid-May. The blockade could last months, and military escalation is more likely. A full escalation would take 2-3 months.

The blockade further damages China economically by blocking Iranian oil, making a constructive summit unlikely. China has mixed feelings: a weak Trump might empower more hawkish China advisors in the US.

Some in China see the US shooting itself in the foot, pissing off allies, and starting wars, which benefits China's image as a responsible stakeholder.

But Trump is also a deal-maker who chickened out on tariffs and wants a deal with China, unlike more hawkish elements in Congress.

The AI story is not a fad or bubble; it's a long-term secular boom. There are 15 technologies of the future (AI, semiconductors, robotics, etc.) creating a Cambrian explosion.

US potential growth could rise from 2% to 4% by decade's end, regardless of who is in power. China is also a major beneficiary. This positive aggregate supply shock increases growth and reduces inflation, dominating over stagflationary shocks like war in the medium term. 'Tech trumps Trump's temper tantrums.'