🥛 How markets respond to military escalation ⚔️

GM. This is Milk Road Macro, the newsletter that hits harder than oil prices the moment someone whispers “Strait of Hormuz”.

Here’s what we’ve got for you today:

✍️ Everything you need to know about the escalating Iran situation.
🎙️ The Milk Road Macro Show: The 10 Macro Signals That Still Support a Bull Market w/ Ryan Detrick.
🍪 U.S. Industrial Production surged higher in January.

Summ (formerly Crypto Tax Calculator) is a tax software built specifically for crypto. Get started with Summ with a 20% discount.

Prices as of 10:00 a.m. ET.

EVERYTHING YOU NEED TO KNOW ABOUT THE ESCALATING IRAN SITUATION

This week, tensions between the U.S. and Iran have been escalating.

Talks are ongoing between the two countries - but a U.S. military build-up in the Middle East is clear.

It’s less than a year since the U.S. and Israel conducted a short and calibrated military operation in Iran last summer.

But the prospect of more military intervention in the Middle East now probably needs to be taken seriously.

And this could rattle global asset markets.

So, what’s going on?

What are the chances of a strike on Iran?

What might happen if the U.S. strikes Iran?

And what does it all mean for asset markets?

Let’s take a look…

So, what’s going on?

Signs point to the Trump administration weighing a major military escalation in Iran and the Middle East.

The U.S. and Iran are currently in the middle of nuclear negotiations - recent talks in Geneva ended with Iran describing progress on "guiding principles”, even as the two sides remain divided over uranium enrichment.

The talks showed some progress - an expected Iranian proposal is due in two weeks.

However, in recent days, the U.S. has been undertaking a major deployment of air tankers, cargo planes, and other military aircraft to the Middle East.

Source: Flight Radar 24

Iran's Revolutionary Guard simultaneously conducted live-fire drills in the Strait of Hormuz as part of a naval drill.

According to widespread reports, national security officials have informed President Trump that the U.S. military is prepared for potential strikes on Iran as early as this weekend.

A recent widely cited report from Axios details how the U.S. is close to a “massive”, weeks-long full-fledged “war” with Iran, with a “90% chance of kinetic action”, citing anonymous sources.

Axios is typically viewed as a somewhat credible news source, but it is a “scoop culture” publication and not a “top-tier” credible source.

What are the chances of a strike on Iran?

According to speculators on Polymarket, there’s a 51% chance of at least one U.S. strike on Iran within the next month (by March 15).

Odds rise to a 75% chance of a strike at some point this year.

Source: Polymarket

To be explicit, in this particular market, “a strike” is measured as “the U.S. initiates a drone, missile, or air strike on Iranian soil or any official Iranian embassy or consulate”.

What might happen if the U.S. strikes Iran?

I’m not a military expert - but I have read many “thought pieces” from actual military experts, so you don’t have to.

And they all boil down to three main options for the U.S. (in order of likelihood):

1. A limited “signal strike”

Several recent analyses frame the first and most likely option as a short, sharp package aimed at restoring deterrence or enforcing a red line - without trying to topple the regime. An Atlantic Council piece explicitly lays out a menu that includes symbolic/conventional strikes tied to nuclear or missile infrastructure and/or security apparatus targets.

2. A “phased campaign” (days to weeks)

Another strand of commentary argues that if Washington chooses force, it may sequence strikes: degrade air defenses first, then hit “priority nodes” (often described as nuclear and missile-related) in follow-on waves. Anadolu’s recent explainer explicitly mentions phased strikes as an option being discussed.

3. Broader package (missiles/drones/maritime pressure)

Recent reporting has focused heavily on the Strait of Hormuz as the arena where pressure and signaling can rise quickly. Iran’s recent drills and temporary closure threats are being treated by analysts as both deterrent messaging and preparation for leverage if strikes occur. This scenario may include air strikes + increased maritime presence operations, expanded air/missile defense posture, and cyber activity.

THE SOLUTION TO CRYPTO TAXES

Tax season is right around the corner.

And if crypto taxes are already stressing you out, meet Summ.

Summ is a tax software built specifically for crypto.

Why we like it:

3,500+ exchanges, wallets and crypto projects (with DeFi, NFT, staking and airdrop support)
Direct TurboTax integration
Official tax partner of Coinbase and Metamask
Helps sanity-check your new 1099-DA form/s.

The best part? You can get 20% OFF Summ for the first year.

Stop doing your crypto taxes the hard way.

Get started with Summ with a 20% discount.

EVERYTHING YOU NEED TO KNOW ABOUT THE ESCALATING IRAN SITUATION (P2)

And how might Iran respond?

1. Strikes on U.S. bases in the region

This is typically listed as the most “obvious” retaliatory route: rockets, missiles, and drones against U.S. facilities. Commentary also underscores that even if Iran’s capabilities are degraded by U.S. strikes, they are not eliminated, and Tehran still retains options to impose costs.

2. Escalation through proxies (Iraq/Syria, Lebanon, Yemen)

Analysts often describe proxy use as Tehran’s classic pressure valve - but with a constraint: if proxies inflict U.S. casualties, Washington may respond far more harshly. So the expectation in many scenarios is harassment + attrition, calibrated to avoid crossing the line into a full U.S./Iran shooting war.

3. Maritime disruption in/around the Strait of Hormuz

For many years, Iran has continuously threatened to close the Strait of Hormuz, a significantly disruptive act - but has never actually done so. This is consistently described as high leverage but also high risk for Iran - because it can trigger massive international blowback and threatens Iran’s own economic lifelines. Still, recent real-world signaling (drills/temporary closure announcements) keeps this possibility front and center.

And what would it all mean for markets?

Asset markets hate uncertainty.

So, it’s likely that risk asset markets, like stocks and Bitcoin, would immediately price in an “uncertainty discount” if a strike occurs, or an imminent strike becomes highly likely.

The U.S. and Israel conducted a short and calibrated military campaign in Iran between June 13 and June 23, 2025.

During this time, the S&P 500 slid 2% lower.

Bitcoin fell 11%.

Source: TradingView

These conflict-driven pullbacks in risk assets are almost always a buying opportunity historically (it’s almost certainly not the start of World War 3), assuming you were already bullish on the asset before the military event occurred.

However, the market that would be most heavily directly affected by tensions escalating in Iran would be crude oil.

If a military operation in Iran begins - the price of crude oil will likely spike higher (Iran is a relatively large oil exporter).

This week, WTI crude oil has risen 7% as tensions have seemingly escalated.

Source: TradingView

If a closure of the Strait of Hormuz becomes likely, this would likely send crude oil prices soaring substantially higher.

The Strait of Hormuz is a tiny sea passage measuring just 21 miles (34 kilometers) wide at its narrowest point.

Source: Mapbox

Tankers haul roughly 16.5 million barrels of crude a day - about a fifth of the world’s daily output - through the waterway.

It’s known as one of the most critical chokepoints in global trade.

Oil prices would certainly soar a lot higher immediately if Iran attempts to block the route.

Crude oil prices spiking even higher and remaining elevated may have a significant impact on inflation levels across the world, and this would be a major global geopolitical event.

A closure of the Strait of Hormuz is very unlikely in my opinion, as it would cause such widespread disruption - but it is an option on the table for Iran.

Wrapping up

Tensions are escalating between the U.S. and Iran.

The probability of some kind of U.S. strike/military operation in Iran has increased significantly in recent days.

If a military operation does occur - prepare for moves across asset markets.

Risk asset markets will likely price in an “uncertainty discount”, while crude oil is likely to spike higher.

But remember - it’s almost certainly not the start of World War 3.

10 MACRO SIGNALS STILL BULLISH 📈

In today’s episode, we sat down with Ryan Dietrich to break down why he believes the bull market isn’t finished, and what market breadth, credit, and leadership rotation are signaling right now.

Here’s what you’ll hear:

Why healthy breadth and calm credit markets still point to upside, and what would flip the thesis.
The shift away from Mag-7/AI leadership into cyclicals, energy, industrials, materials, and international markets.
How hyperscaler capex and fiscal tailwinds support growth, but can still create uneven winners and losers in tech.
Practical portfolio moves, including “diversify your diversifiers,” plus how he thinks about sizing gold and bitcoin.

Press play and dive in 👇️