Middle East War could escalate this week

I'm pretty bad at stocks but know some things about geo/politics.

You can check my last post but last time Iran attacked Israel, I correctly predicted that things wouldn't escalate. I'll explain why I think it didn't again later.

This time though I think things might be different.

I don't have a long time to write so this'll be pretty quick but I'll include some sources as I go.

Hezbollah (presumably) just rocket attacked a kid's soccer game and killed more than a dozen children. Hez is denying it at this point but it seems like Israel has made up their mind who did it.

https://www.yahoo.com/news/israel-hezbollah-fire-exchange-kills-162759719.html

The gruesome nature of the attack means that Israel will retaliate against Hezbollah without question. (Unless there emerges some dearth of evidence that it was some rando or another group, I don't anticipate seeing that). My guess is that Israel won't wait too long, I'd be surprised if by Monday there hasn't been an attack by Israel in Lebanon.

Hezbollah is different from HAMAS. They are better fighters with better equipment. 50k soldiers, many Syria vets, 150k rockets that they haven't tapped into yet despite steady attacks since 10/7, and much better intel. They aren't boxed-in geographically so they can funnel resources through Iraq from Iran. All that's in this article.

https://www.cnn.com/2024/06/27/middleeast/israel-lebanon-hezbollah-analysis-intl-latam-hnk/index.html

Hezbollah has the capability to launch attacks in Israel that will cause many casualties, maybe more than 10/7. Question is how much will they commit to an attack and that is dependent on how Israel chooses to respond.

When Israel attacks Hezbollah in Lebanon, the counter-attack by hezbollah will be much more sophisticated and effective than HAMAS or Iran's missle/drone attack. They have intel about Iron Dome facility locations, they released drone footage of a bunch of important defensive assets around Haifa, they could go after major airports in Israel, and the quantity of rockets they can fire will ensure a substantial number of civilian casualties in Israel. I'm ashamed at my lack of sources for all this and double-ashamed that CNN is my go to article but all this is really in there.

If things escalate quickly without off-ramps between Lebanon/Israel, Iran will likely get involved as Hezbollah is their surrogate.

In terms of a direct conflict with Israel, Iran has some constricted options.

Their ballistic attack earlier this year flopped. That might have been because they weren't putting their best foot forward by my guess is that lobbing missiles/drones wouldn't be their best option as it would invite retaliation.

Israel's retaliation would be strategically devastating. Israel used the last little scuffle with Iran to demonstrate some drone weapon that still isn't fully understood. But what happened was Israel attacked and a comm's tower real, real, REAL fucking close to a nuclear enrichment site and Iran didn't know it happened until it was over. Something super-stealthy blew it up. Iran doesn't want that smoke, a conventional war with Israel is a loser for them, even if they've got some better weapons than what they used last time.

Another response could be nuclear. Iran has been getting closer to Uranium enrichment (meaning they can make the big BADAboom kinda nuke, not just the bang ones like Pakistan has). It seems super unlikely to me that Iran would attempt to nuke Israel, if for no other reason than that's a lot of uranium to lose if the missile gets intercepted. There's a lotta news about enrichment in Iran but the massive L they took trying to get bombs to fall in Israel last time dramatically called into question their delivery capabilities.

So absent launching, Iran could "declare" that they have a nuclear weapon. By itself, this is massively destabilizing. It could invite Israel to respond in kind and abandon "opacity" (Israel doesn't confirm or deny that they have nukes but they have a fuck ton of them and they're modernized/good ones). If Iran chose this as a move, I'd imagine its in tandem with some international actors getting their back like Russia, China, etc. Then you start to see some sides being taken and global actors getting involved. Clock on WW3 ticks.

A non-nuclear but devastating response would be for Iran to (attempt to) shut-down the straight of Hormuz. There's a lot written about whether they can do it or not, but even attempting could be massively disruptive to shipping/security and ergo markets. This could go along with or precede nuclear declaration.

What's needed to avoid broader conflict is some sort of an off-ramp. Israel needs to be able to attack Hezbollah in a way that will appease their hardliners but not trigger broader escalation. Or similarly, an off-ramp for Hezbollah where they sort of yield after the Israeli retaliation. I'm certain there's thousands of diplomats worldwide right now trying to figure these solutions.

But with a dozen dead kids at a soccer game, I think its going to be real hard to talk Israel into a small response. So the next few days/weeks could get dicey.

Ways to play it:

VIX – calls, especially if Israel hasn't retaliated by Monday at open. Maybe about a month out jic it starts escalating. If VIX is high monday but there appears to be an off-ramp forming, maybe puts.

OXY MRO HES – oil companies with limited exposure to the middle east, they all went up after 10/7

DJT – if a ME war escalates, it could doom the dems. Dunno how DJT will respond but I'll be watching.

TLDR – shit could get real in the middle east this week