← Breaking Points with Krystal and Saagar
Breaking Points with Krystal and Saagar
3/31/26: Trump Floats Iran Surrender, Trump Rock Bottom Polls, Gas Prices Spike
01:15:04
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Guaranteed Human support for the show comes from Public, the investing platform for those who take it seriously. On Public, you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are like ETFs with infinite possibilities, completely customizable and based on your thesis, not someone else's. Go to public.com podcast and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com podcast paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory services by Public Advisors llc. SEC Registered Advisor. Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available at public.com/disclosures.
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- [01:36]
Krystal Ball
Wasn't that delicious? So good.
- [01:38]
Saagar Enjeti
Your bill, ladies. I got it.
- [01:40]
Krystal Ball
No, I got it. Seriously, I insist. I insisted first. Oh, don't be silly.
- [01:46]
Saagar Enjeti
You don't be silly. People with the Wells Fargo Active Cash credit card prefer to pay because they earn unlimited 2% cash rewards on purchases. Okay. Rock, paper, scissors for it.
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Rory Johnston
Rock, paper, scissors.
- [01:57]
Krystal Ball
Shoot. No.
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The Wells Fargo Active Cash credit card. Visit Wells Fargo.com ActiveCash Terms apply.
- [02:06]
Rory Johnston
Hey guys.
- [02:07]
Saagar Enjeti
Sagar and Crystal here.
- [02:08]
Krystal Ball
Independent media just played a truly massive role in this election and we are so excited about what that means for the future of this show.
- [02:15]
Saagar Enjeti
This is the only place where you can find honest perspectives from the left and the right that simply does not exist anywhere else.
- [02:21]
Krystal Ball
So if that is something that's important to you, Please go to BreakingPoints.com, become a member today and you'll get access to our full shows unedited ad free and all put together for you every morning in your interview inbox.
- [02:32]
Saagar Enjeti
We need your help to build the future of independent news media and we hope to see you@breaking points.com. good morning, everybody. Happy Tuesday. We have an amazing show for everybody today.
- [02:43]
Krystal Ball
What we have, Crystal, another wild morning. We've got a Trump truth to reckon with. He says he's very much indicating he'll just walk away from Iran, leaving the Strait of Hormuz closed. He tells the world to go get their own oil, that he's done with it. So I don't even know where to begin with this. So we'll get into that. Also, this may be quite related. He's seeing some of the worst poll numbers, if not the worst poll numbers of either terms of his presidency. So there's a lot going on there. Some new analysis too, of just how dire things may be for him and where we are heading. National average for gas is officially over $4 a gallon. Our oil analyst is going to join us to talk about the level of disruption and what would happen even if Trump does unilaterally taco now, what that will mean for the future. Meanwhile, global ramifications of that, you know, oil blockade are spreading rapidly. So we'll take a look at that. Israel yesterday passed a death penalty bill that is only for Palestinians. In another new disgusting low. We also are going to pick up the story we tried to do yesterday. We just couldn't fit it in the show about the IDF assaulting a CNN photojournalist and the fallout from that. And then had to take a look at Trump's ballroom. Apparently it's coming with a new nuclear bunker. Yeah. Wow, the great timing, really.
- [04:06]
Saagar Enjeti
Time to put the tinfoil back on. Oh, it was on yesterday.
- [04:09]
Krystal Ball
Little unsettling there.
- [04:10]
Saagar Enjeti
I'll go home. But like, maybe we put it back. Maybe all those people who've come up to me in the last several months to tell me that there's a data center under the ballroom. Maybe they're.
- [04:18]
Krystal Ball
They were onto something.
- [04:19]
Rory Johnston
Maybe they were right.
- [04:19]
Krystal Ball
They were onto something for sure.
- [04:20]
Saagar Enjeti
That's what says the stuff out loud. All right, before we get to that, thank you to everybody who's been supporting the show. BreakingPoints.com, we did our AMA Y yesterday, which was very enjoyable. You can of course have access to that if you want to sign up for our premium program. Otherwise, please hit subscribe to our YouTube channel. I believe we are now at 1.98 million. Just a mere 20,000 YouTube subscribers to go to hit the coveted 2 million mark. We get no plaque. It's just bragging rights. But it is of course, thanks to all of you. And if you are listening to this podcast, please go ahead and share an episode with a friend. It really helps other people find find the show. Let's go ahead and start then with the unilateral potential Trump Taco. And let's put this up here on the screen. Literally breaking as of this morning. Let me go ahead and read it. All of those countries that can't get jet fuel because of the Straits of Hormuz, like the United Kingdom, which refused to get involved in the decapitation of Iran. I have a suggestion for you. Number one, buy from the U.S. we have plenty. Number two, build up some delayed courage, go to the Strait and just take it. You'll have to start learning how to fight for yourself. The USA won't be there to help you anymore. Just like you weren't there there for us. Iran has been essentially decimated. The hard part is gone. Go get your own oil. This fits very much with a late breaking story last night. Let's go and put the Wall Street Journal up there on the screen. Alex Ward over at the Journal. I highly recommend the follow. By the way, excellent reporter. He was also the person who broke the Roe vs. Wade story back in the day. So highly recommend. I've known him for a long time. He says Trump tells AIDS he's willing to end the war without reopening Hormuz. So if you put these two things together, it does indicate that at the current moment, that is Trump wants us to think or is potentially doing so. This is at least what Donald Trump is telegraphing now publicly and or privately behind the scenes, everybody do keep in mind that all of this could be an elaborate psyop, as we have seen now multiple times from the Trump administration, potentially trying to signal that the war is over. While if we continue to follow all of the ground troops in the region. So I no way wanna say that this is the end, but let's pretend that it is. Let's pretend that it's Taco Tuesday. And of course stock futures are surging right now as you and I speak over this. Should they really be surgin this is a genuine Suez moment for the United States. Let's think about this. The US military went into this campaign unilaterally with Israel with a singular objective. Unconditional surrender, the decapitation of the Iranian regime, a Replacement of that regime, A reopening recontrol of the Straits of Hormuz. At one point we floated a reinsurance scheme backed by the United States and the United States Navy, sailing freely through the strait. Now, after over a month, there is now an effective declaration. Trump says, well we have actually changed the regime cuz we killed the original Ayatollah. Now we have a new Ayatollah whose father was murdered and his brother and his wife. I mean, can't even go through the list of family members. The guy who had the fatwa against nuclear weapons, he's gone. The hardline IRGC is all in control. The Straits of Hormuz is under Iranian control. Who is allowing selectively certain ships that were either Pakistani or Chinese or any country which is willing to make a deal with them. They passed a piece of legislation yesterday in their parliament saying, saying that they have officially approved a toll program almost like the Egyptians in the control of the Suez crisis. And then Trump comes in and he says that we are basically will be done because you didn't join us. So first of all, it was a war of choice. It's not like we needed anybody. Allegedly we were told we could do this all by ourselves. We didn't necessarily need anyone to come in. We blew up the global economy quite literally. We're gonna tell everybody just in the one month of what it looks like Asia. 80% of oil from through the Straits of Hormuz goes to Asia. Only 50% goes to China. The rest of them are extremely critical US allies. Lng, which is heavily reliant Europe is after the Russian invasion of Ukraine. Oh well, sorry. 17% of Qatar's RAs Lafan gas that's gone just evaporated for the next four to five years. Good luck paying for it though, by the way. So what this means is that the US came in here, didn't even military accomplish its objectives, basically got all of our bases like destroyed and or hit. We lost all these strategic aircraft. We humiliated ourselves really in terms of what people expected the United States to be able to do. Now we could finish the job with ground troops. We decided we don't wanna do that and we tell the Europeans and the Asians, go get your own oil. So what's more likely, Crystal, that the UK and the EU and Japan and South Korea are gonna form a coalition of the unwilling and go and militarily take the Straits of Hormuz or Tehran is going to be like pay up, let's go. And by the way, no more dollars. You're Going to denominate it in one any US flagged ship. You're never coming through here. If you're sailing to Israel, you're not going. You're not coming through here either. And this is the new new sheriff in town in the Straits of Hormuz. What's that sound like to you? That sounds like a strategic victory right now so far for the Iranian empire. They get to the Iranian regime. Potentially. Empire used to be an empire. So we've got the Iranian regime, which is now re empowered, massively rich already as a result of the war and spiking oil prices, control over the Straits of Hormuz. They stood up and survived over the big bad American military and Israel. I mean, this is a strategic nightmare. And yet somehow it is still the preferable outcome.
- [09:35]
Krystal Ball
Yes.
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Saagar Enjeti
And that's what's so insane about it, is we were really screwed either way, which is why we never should have been in this war. I'm just like thinking through all of the global ramifications and I'm like, I cannot believe that we just blew up the global empire and then the global economy and told all of these countries. I mean, if you're the Gulf, I was telling you before, what do you do now? Iran has been firing all your ship. Now you gotta pay the piper.
- [09:56]
Krystal Ball
Yeah, Dubai was getting messed up just yesterday.
- [09:58]
Saagar Enjeti
Dubai was. They got more missiles yesterday than the first week of the war. Do you just pay it? I guess. I mean, and you bought all these billions of dollars and all these troops are here and backstopping your economy and
- [10:10]
Krystal Ball
Dubai, your Abu Dhabi, like your whole brand is screwed. Oh my God. It's over. I mean, it's okay. So again, very possible that this is just a psyop and some other thing is in the works. We'll put that. But I do actually, I actually do believe that Trump would really like to taco that he all the reporting about he's trying to find an off ramp, blah, blah, that he's bored. I mean, I think that is all true. And you see, the bond markets are a problem for him. The oil markets are problem, the stock market's problem for him. His poll numbers are tanking. He's looking at this and going like, all right, we need to wrap this up. So I do give it some credence that this is possible. That he's like, all right, we're just gonna walk away. So let's be really totally clear. If he walks away and leaves the Strait of Hormuz in Iranian hands for them to do with as they Wish it's a surrender. I mean, it is a surrender.
- [11:00]
Saagar Enjeti
The ultimate surrender.
- [11:01]
Krystal Ball
Yeah.
- [11:02]
Saagar Enjeti
Because the role of the U.S. navy, why do you and I pay the taxes we pay? Is to guarantee commerce on the high seas. That is literally the point of the empire. That's why Japan and South Korea and all these other countries are like, okay, let's do all this stuff. In exchange, you guarantee our security and our ability not to be Chinese vassals. I mean, what are we doing here now?
- [11:24]
Krystal Ball
So we came in. Okay, let's just remember. Let's rewind back when Trump announces in his baseball cap without a tie on before going to a party at Mar a Lago, announces that he started this war, okay? He's calling on the Iranian people to rise up, right? So regime change. Like, not the fake kind that he's claiming, but the real. Like, we're gonna have somebody who's a puppet and amenable to our interest, blah, blah, blah. That's what the original goal was. That and to destroy or make render impossible or do some deal with them to make sure that they're never gonna pursue a nuclear weapon. Okay, Those things are off the table. Then the war became about reopening the thing that the war closed, the Strait of Hormuz. Now they're saying that is also off the table. And this is why you could never get a straight answer out of them after the initial days of the war of what the objectives actually are. So now what are we gonna. I mean, Trump will claim Mission Acalo. We decimated them and we set them back. No, what you did is you strengthened them. There is zero doubt about it. Yes, there, you know, this and that got hit, and there were, you know, tons of civilian deaths. It was horrible. Right. There's no doubt that there were losses on the Iranian side, but if they come out of this with control over the Strait of Hormuz, this is like an ability of. For them to play in the world and have the sort of sanction power that we do, Right. If some other country is messing with them, if some countries supporting a genocide in Gaza or whatever, they can wield this now as a weapon. They can throw their weight around, not to mention, okay, they still, by all accounts, still have all of the highly enriched uranium and nuclear material and know how do you think that they may pursue a nuclear weapon now to make sure they don't get messed with again? I certainly would if I was them. So, I mean, what are we, like, so. Okay, so let's play this out. I'm just trying to think of, like, what all the implications are. So you're right, the Arabs, like, Gulf Arab states, totally fucked, totally screwed. Like, what are they gonna do?
- [13:23]
Saagar Enjeti
They have all these bases, the Iranians, listen, I'm Iran. I've got you by the balls. And you're Saudi Arabia and you're uae. Every US troop on the ground gotta go. Yeah, now what? I mean, Trump says he doesn't want to invade.
- [13:37]
Krystal Ball
And this is what they. Right. And this is what they said their original goal was. We want all US Troops out of the region. We want these bases closed. And we all look at that and we're like, that's insane now. It's like, is it, Is it insane? Israel is on here floating. Hey, we want the US bases on our soil, which would be a major. I mean, that's a major change in terms of their orientation. Or our orientation basically means like the merging of our states completely. That's a whole other can of worms. But that could be where we're heading if these Gulf Arab states are like, you know what? This is not gonna work for us. Like, you made us a target and then you screwed everything up for us and then you cut and run. Okay, so that's the Gulf Arab states for the Israelis. Iran is not in chaos. They did not collapse the state. They strengthened the logic of pursuing, you know, longer range ballistic missiles and a nuclear weapon. Do you think the Israelis are just gonna sit back and say, that's cool, we're gonna let that happen? No, they're not. You're still gonna have the same logic on the Israeli side from Netanyahu and his whole crew. And they're gonna continue to be trying to, you know, drag us back in. The same sort of thing that played out here where reportedly Israel is gonna strike Iran anyway. And so our leaders were like, well, I guess we're gonna do it too. Are we just gonna let them get hit by Iranian missiles like that? So that's a whole situation. I mean, the whole thing is. And then of course, in terms of the rest of the world, they look at us, this global superpower, allegedly nuclear armed global superpower, and we were like, opening the Strait of Hormuz is gonna be too militarily difficult for. You think they're gonna go in? No, of course not. Of course not. They're going to look at this and go, okay, China, okay, Iran, like, time to make some deals. This is a new world order. I mean, that truly is what we're looking at here. And I know that may sound really grandiose, but this Level of humiliating defeat at the hands of, I mean Iran is a large country, it's sort of like a middle income country. They have clearly military power, but really they just out thought us, they out planned us, they out thought us. They were much smarter, much more strategic. And Trump came barreling in thinking that he could do a few day excursion and get some W before his meeting with China and then it'd be all good. And he's an idiot and he's a fool. And they revealed it.
- [15:50]
Saagar Enjeti
This is why part of me is like, why is that we shouldn't be too declarative is because all of this is about to become real obvious to NATO, to Japan, to South Korea, to the Gulf, Saudi. I mean, yeah, MBS and MBZ are gonna be on the phone today, right? Being like, listen man, this is a, this is, you can't leave us hanging like this. And that's why every single report out of the Gulf is they're like, finish the job, finish the job. We can't live this way. So now what? So when Trump tells the UK and Japan and South Korea to go get your own oil, they're like, oh, we'll get it all right. But we're gonna pay the Iranian hostage toll. Whatever they want, we'll pay and denominate
- [16:27]
Krystal Ball
it in Chinese oil.
- [16:28]
Saagar Enjeti
And then what are they gonna say? I mean, what's America gonna say? They're gonna be like, oh, well, you, X, Y and Z. And now this is why this is like empire ending in a way is the Japanese are going to be like, okay, our security guarantor or 90% of our oil. What do we do? What choice would you make? I mean, this is when your actual back is up against the wall.
- [16:49]
Krystal Ball
I mean, Pakistan is already.
- [16:50]
Saagar Enjeti
They're dead.
- [16:51]
Krystal Ball
Making deals with them because they are so screwed.
- [16:54]
Saagar Enjeti
100% of Pakistani LNG comes from Qatar. They don't have a choice. Right. It's literally existential. Bangladesh, all of the India. I mean, already you've watched what happens with Russia. I mean, yeah, by the way, even Russia, in terms of their strength that's come out of this war. I don't accept that Russia is an enemy of the United States. You could say adversary, largely as a result of our own creation. But whatever, it has now proven its ability and this is part of the world.
- [17:19]
Krystal Ball
Well, we're strengthening this Iran, China, Russia alliance.
- [17:24]
Saagar Enjeti
Yes.
- [17:24]
Krystal Ball
And that's very powerful.
- [17:26]
Saagar Enjeti
So right then let's think about China. So China's going to come in and say we have to denominate all of the exchanges have to be denominated in 1.50percent of our oil comes through the strait. So they will make a deal where they massively enrich Tehran. They could create, they already created the parallel banking system to get around U.S. sanctions. They could create an entire exchange. I mean, this is the backbone of America, of what we really are, is not just the strength of the dollar, but all of the power of the swift sanctions and our ability to compel commerce across the globe because of the strength of our consumer economy. And that's part of why I go, he may want this today, but soon the phone is gonna ring. And that's part of the reason with those troops in the region, he might just have to use them. He might say, you know what, what we're all talking about here is so unacceptable that we actually do have to do some sort. Not we don't have to, but they will want to do some ground invasion. Cause you just can't. You cannot have this if you are all of these critical U.S. allies.
- [18:24]
Krystal Ball
And you could end up with a scenario where we, you know, effectively surrender and then Israel and Iran are still warring and we're right back in. I mean, that's another possibility. Here is, you know, after the 12 day war, something we warned about and many others who were opposed to going to war with Iran to begin with, that this is not over. Like, yes, Trump is declaring mission accomplished. And it was much, you know, cleaner way to wrap it in a bow than anything that he thought of for this new phase of the Iran war. But what we said is you have not fundamentally changed the logic coming from the Israelis and the way that Trump is very susceptible to being lured. And again, I hate using this language because obviously it's on him. But clearly the Israelis were pushing for this, right? And we knew that after the 12 Day War, the fundamental logic was not going to change, which is why I don't think any of us were surprised when we ended up back in. Horrified, yes. Surprised, no. And so if he does walk away now, you still have a situation. Not only has the logic not changed, the logic has gotten worse for the Israelis or stronger for the Israelis in terms of continuing to pursue this war. Because you've got, you know, more of an impetus to actually pursue a nuclear weapon. You've got a harder line regime, and now you've handed them this extraordinary power. Now I will say the Israelis are talking about, oh, well, we'll create a pipeline, you know, that bypasses that. That takes a lot of fucking time
- [19:57]
Saagar Enjeti
to definitely be wiped out with A drone.
- [19:59]
Krystal Ball
How would you learn that? Yeah, such a great point. But even if you give that credence, I mean, the time alone. And so in the next decade we're just gonna deal with, I mean, you'd be better off just going whole hog on nuclear and renewable energy versus thinking that some pipeline is gonna save you at this point. Not to mention, I mean, Israeli society has its own problems. And I don't know, I agree with you that I do believe, if I had to say, I think Trump does. He wants to be done with this. He's trying to find an off ramp. There's a lot of reporting in that regard. He's been floating various things, trying to basically will a deal into being, project some sort of strength. Pretend like these ships that are passing through the Strait of Hormuz because other countries are making deals with Iran. Like this is some gift to him. He's trying to figure something out, but he has really. This is Robert Pape. He is in an escalation trap. It is a trap. And if he walks away now, the repercussions may be such that he just can't stomach it. And the countries surrounding us, that our allies also can't stomach it, and the business world can't stomach it. And so there's going to be tremendous pressure on him to continue this thing and try to, I don't know, I mean, and that's the other thing is, let's say he, okay, he hears from everybody, he's like, all right, I guess I got to keep going with that thing, with this thing. What does that mean? Because the seizing of the nuclear material is a fool's errand and insane. The seizing of the islands just enmeshes you further. Whether it's Carg island or these uae, whatever. Like that just enmeshes you further. That's no solution. The only solution is like a full scale ground invasion. Even then, it's not really a solution. But this is the corner that he's backed himself into and it is a disaster. And look, disaster for the world. I mean, we're like, we're gonna suffer here in the US but people around the world, we're gonna talk about this later. Like, you know, developing countries around the world, the level people are gonna starve to death. Like, there's gonna be places where you just can't buy fuel. The level of demand destruction that would be required is just, you know, shocking.
- [22:07]
Saagar Enjeti
You're not starved now because of the taco, but it's one of those where, look, we, we, we may have an end to the actual crisis. But this is a full blown like unleash. This is the Pandora's box. I mean this is why you shouldn't get into any of this in the first place.
- [22:21]
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- [23:22]
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- [24:55]
Saagar Enjeti
We have a lot of elements here. I'll skip most of them, but let's just make sure again that we set the table, that there's still a war going on with Iran. Let's put a 2 up here on the screen just to show all of you. This is video that came out just yesterday. This is, by the way, what makes me very skeptical that this unilateral taco might happen. So this was a massive airstrike, bunker busting bombs dropped by the United States just yesterday on an Iranian ammo depot which was in Isfahan, which is near of course, all of those nuclear facilities in Iran. Now here's the thing. Originally there was some cope and hope, honestly that there was. They were like, oh, we finally hit the missile city. The Pentagon even confirmed this is an ammunition dump with artillery and other things. And that is what made me think, look, you can strike an ammo dump with bunker buster bombs, not the missile city. Now you probably would if you could, but why would you do that, especially in the area where you have these nuclear facilities and some sort of potential nuclear operation was going to happen. So keep your eyes open. You know, the unilateral taco can also still happen even after some sort of potential nuclear operation that's happening there.
- [26:01]
Krystal Ball
The other ground, the other reading of this, the one reading of it is that, yeah, this is, you know, Isfahan is where they think a lot of the nuclear material is at this point. And so you could be trying to, you know, degrade their, their capabilities there for some eventual, you know, commandos coming in and trying to seize the nuclear material, all that stuff. Okay, that's one possibility. The other possibility is Trump shared this on Truth Social, which makes it more noteworthy because clearly wanted to highlight like, oh, look at this big explosion. You know, the other possibility is this is just him trying to show like, you know, oh, look at this grand display of how much we've decimated them, et cetera, because it was a large explosion. So I don't know, but I think either of those interpretations are possible.
- [26:46]
Saagar Enjeti
Take it for what you will. You also look, look, now that we have this truth, the taco stuff, it's everywhere. Let's put a three, let's go ahead and play it. This was Caroline Levitt telling everyone just yesterday, well, the president said four to six weeks. We're on day 30, so we're on track. Let's take a listen. President Trump initially said about four weeks. Secretary of State Rubio on Friday reportedly said it Might be another 2 to 4. Is 2 to 4 the current ballpark
- [27:09]
Krystal Ball
that the administration is thinking with respect to the timeline? Again, the president, commander in Chief, the Pentagon has always stated 4 to 6 weeks Estimated timeline for Operation Epic Fury. We're on day 30 today. So again, you do the math on how much longer we, the Pentagon needs to fully achieve the objectives of Operation Epic Fury, which I will reiterate.
- [27:30]
Saagar Enjeti
So there she says, laying out the timeline. Secretary Haig said this briefing literally right as we're all talking here, I haven't seen anything exactly noteworthy. But he has continued to say Iran should try to make a deal because we're decimating. We are the people that are making sure. He said we are like, you know, bringing them to the table, negotiating them with bombs. So you could see that the messaging has shifted dramatically. We also should go to a seven. Now, this again was a little bit of a preview of the current truth Social this morning. Here is Secretary of State Marco Rubio in an interview with Al Jazeera where he again opens the door to well, maybe we don't have to control the Straits of Hormuz. Other countries could do it. Let's take a listen.
- [28:08]
Krystal Ball
The Straits of Hormuz will be open
- [28:10]
Saagar Enjeti
when this operation is over. It will be open and it'll be open one way or another.
- [28:14]
Rory Johnston
It will be open because Iran agrees
- [28:15]
Saagar Enjeti
to abide by international law and not block a commercial waterway or a coalition of nations from around the world and
- [28:22]
Rory Johnston
the region with the participation of the
- [28:24]
Saagar Enjeti
United States will make sure that it's open. So the Straits of Hormuz will be open. Iran either agrees to abide by international law and not by international law from this administration. Come on. I know this is fake as hell.
- [28:39]
Krystal Ball
I know you opened the war by murdering a bunch of schoolgirls and assassinating their head of state and threatening to
- [28:45]
Saagar Enjeti
bomb nuclear or sorry, it's a bomb, like power plant.
- [28:48]
Krystal Ball
Yeah, Trump literally yesterday was like a blow up your water plants. I mean, this is like textbook war crimes. But whatever.
- [28:55]
Saagar Enjeti
As I said, international law is fake. And that's fine. International law has always been fake. It's really all been in terms of the norms and the enforcement ability of being able to do so. We have decided to get in bed with Israel, this rogue state, and conduct ourselves the way that we have it always kind of has been an illusion. We just decided to put the blinders on, and it's like, all right, well, if we're gonna go about the world and we're gonna kidnap Maduro and we're going to just come in, create a gigantic mess, withdraw, tell everybody else to do so, who are we to tell the Iranians exactly how are they gonna govern the Straits of Hormuz? They will govern by force, as we could do it, too. You can invade and take it if you want to. It'd be a nightmare and a disaster. Part of the reason, maybe you shouldn't have gone into this mess in the first place.
- [29:37]
Krystal Ball
Well, and just really quick, Hegseth is doing a press briefing right now. And just a couple things that were not. I see this one clip of him. He says, President Trump will make a deal. He is willing, and the terms of the deal are known to them. If Iran is not willing, then the U.S. war Department will continue with even more intensity. So that's the messaging they're putting out is continuing like this. Oh, we'll deal with them. But we're gonna come in with even more fire, inferior, whatever is where there's. What he's still messaging this morning from the podium.
- [30:10]
Saagar Enjeti
Yeah. So look, look, very important just to put. I just, I really am all over the place this morning just because I have to. I have to deal with the ramifications of what this would mean also to make sure our audience understands the war's still happening, the bombs are still dropping. It's not like the Israelis by the. Oh, they're doing just great. They just basically annexed half of Lebanon. In case anybody's wondering, the Israeli empire, it's expanded the regional. Super. Think about this nation. Since October 7th, they've expanded their border into Syria. They've, I mean, removed the. The leader there. They're basically taking half of Lebanon. They're basically taking the. I mean, they had the West Bank. Now they're solidifying control over at Gaza. Wow. You really. You have to marvel at it. This country, which I don't want to say hijacked, it was, you know, willingly given, I guess. Think about it. We will end our own empire and create a new Israeli one. That's effectively been the net policy. If the current status quo remains as
- [31:05]
Krystal Ball
it is, although the Israelis have their own vulnerability because they can only act the way that they act because they have our full and complete backing at all turns. And the moment that that is taken away, then they are extremely vulnerable. So they have their own vulnerabilities here. My heart breaks for them. Actually, I saw Ryan was sharing this thread on Twitter about this whole like, do they have a right to exist, the state of Israel have a right to exist discourse. And someone was pointing out, like, in what way are they even a state? Because a state would indicate that there are borders and laws that are applied consistently to the citizens of that state. So by the conventional definition, Israel isn't even a state because of the way that they operate. But that's another discussion for another day. I mean, another thing I wanted to point out because I think it's relevant. You've now got two European allies, Italy and Spain, who have both said we are not allowing US Military planes to land at, you know, base at our bases and enjoy flyover rights. So I mean, that's really significant. So it also tells you Italy is
- [32:06]
Saagar Enjeti
way bigger than Spain.
- [32:07]
Krystal Ball
Yeah, Spain from the beginning has been like, you know, it's a left wing government, their adversary. Like they've been opposed from the beginning. Italy coming out and joining them and being like, yeah, we're done here too. That is highly significant and also shows you, you know, shows you the way that our allies are feeling about this and that they are also coming to a point where they're like, okay, whatever we're getting from the US it is not worth it because the costs that are being imposed, I mean, the energy prices in Europe already were high. Now they're going even higher. So they're in quite a bind here as well. And yeah, I don't think to your point about like, let's say we do walk away and just tell them, go get your own oil and good with the Strait of Hormuz. They're going to be quite willing, I think, to go and make a deal with Iran at whatever terms are necessary.
- [32:51]
Saagar Enjeti
People know, no big fan of Europe. I would decouple on my own terms. These aren't the terms that I would do it on. And let's think about Italy. All right, so Italy, NATO country it is, I think four U.S. i want to say four major U.S. bases, probably 15,000 or so troops. A major hub for Africom operate. Remember Benghazi and Libya and all that. They were scrambling the jets out of Italy. It's kind of a critical US Node. Last time I checked. Their own prime. We'll get to this later in the show. Their defense ministers saying he's vague posting being like, I can't sleep at night because of the things that I know that are coming. So obviously then they're facing a crisis, and it's not like their economy was doing all that well, even within the EU context. So for them, high energy prices, it's a nightmare. It's a total disaster, especially on top of what just happened with Russia and with Ukraine. I guess, continuing on down this line, let's just make sure that we get a couple more things that are in here. Oh, right. A11 or. Sorry, a12, please. This also happened yesterday. This was the Kuwaiti crude carrier, the Al Salmi was directly attacked by Iranians docked at the Anchorage area of the Dubai port in the uae. So yesterday, the UAE took more missiles and incoming drones than at any time since the first week of war, showing again Iran's projected ability, or Iran's ability to continue to project some force in the region and also to be able to hit whatever tanker that they want to. There is some confusing stuff around this tanker. Apparently it was bound for China. So there's a lot of reasons as for why Iran hit it. They may have actually mistakenly targeted this carrier and another one that was heading to Israel.
- [34:33]
Krystal Ball
I've also seen it could have been a shrapnel from a missile interceptor, something like that, too. I've got another clip here from Hegseth that is noteworthy on the Strait of Hormuz. Significantly, specifically, he says, on the Strait of Hormuz, there are many more vessels flowing through today than there were, as the President has arranged. Oh, my God.
- [34:52]
Saagar Enjeti
No, he's not. The gunners arranged that. That's not even true.
- [34:55]
Krystal Ball
The President's been clear to Iran, open it for business, or we have options, and we certainly do. There are countries around the world who ought to be prepared to step up on this critical waterway as well. It's not just the United States Navy. Last time I checked, there was supposed to be a big bad Royal Navy that could be prepared to do things like that as well. So he's pointing out this is an international waterway that we use less than most. In fact, dramatically less than most. So the world ought to pay attention and be prepared to stand up. President Trump's been willing to do the heavy lifting on behalf of the free world. Oh, thank you so much, President Trump. To address this threat of Iran, it's not just our problem set going forward, even though we have done the lion's share of preparation to ensure that that strait will be open. So, you know, sort of consistent with what the reporting about Trump saying basically, and his true social being like, hey, you guys use this more than us. Go and get the oil. But in Other comments Hegseth also said,
- [35:52]
Saagar Enjeti
what year do they think we're living in? 1898. I know where the sun never sets on the British Empire. Take a look at the UK and their society.
- [35:59]
Krystal Ball
I know the idea of.
- [36:00]
Saagar Enjeti
And they want to go and do it.
- [36:01]
Krystal Ball
We can't do it, but we're going to. Oh, they're going to. Okay, right. Yeah. And then he also says we'll negotiate with bombs. He loves line. Our job is to ensure we compel Iran to realize that this new regime, this regime in charge is in a better place if they make that deal. And so we'll continue. We're working hand in hand, but the primary effort is a deal. We want the deal to be accomplished if at all possible. If not, then we're prepared to continue. So take from that what you want. Look, I mean, we can't trust Trump's words. This guy's just this idiot, so can't take any of his words seriously either.
- [36:32]
Saagar Enjeti
I think this is what he wants wants to do. I just don't agree it can be done. I mean, well, it can, it can. And then all the consequences that we've laid out just are. But let's.
- [36:41]
Krystal Ball
And it's probably. And those consequences are probably best case scenario at this point, if you continue, it only gets worse.
- [36:46]
Saagar Enjeti
But let's then talk about the economic ramifications. We talked about the empire ramifications. You've got the UAE and Saudi Arabia that are effectively being held hostage here now by Iran. They've proven their capability to hit you. They have. I was listening to an episode this morning about the amount from Odd lot shout out to them about Dubai and specifically the real estate market. But they touched on the amount of 40% of global sovereign wealth is just the Gulf. The big four countries out of the globe Gulf. Almost all that wealth is invested in US companies from venture capital to commercial real estate to private credit markets, which are having their own problems right now. Now, let's take Qatar. The Qatar Sovereign wealth fund.
- [37:23]
Krystal Ball
Right.
- [37:24]
Saagar Enjeti
QIA Qatar Investment Authority. Well, they just took a 17% haircut on their natural gas. Stands to reason they're gonna take some haircut on their flow of cash, which maybe means they can't fulfill future deals or other things. So let's call it 10%. Well, if 10% of that money just dries up, that's a lot of money. I mean, that's billions of dollars. So what's that mean? And then you've got high oil prices as a result of this shock potentially for years. If Iran is messing with the oil market. So these Gulf economies will either be held hostage or they'll have to pull back their investments here in the United States, Japan, South Korea, all these Asian countries which were supposed to invest all this money here, they are getting destroyed right now in their stock markets and their economy. So just think about the ramifications for all of us.
- [38:08]
Krystal Ball
I mean, again, look, and our economy's a house of cards. Like it's basically AI speculation. It's like the whole economy and like gambling, that's.
- [38:17]
Saagar Enjeti
And for everybody saying, well, I don't care about that. I'm like, well listen guys, you know. Oh, actually it'd be a good thing. Yeah, I mean, theoretically. You know what it also means? It means you're gonna lose your job. It means you're gonna pay higher interest rates. It means that you're gonna pay high gas prices. Like, like remember, they'll be fine. Taking a 10% haircut, can you realistically afford to take that? The answer is always no. Is that the people at the top will be okay. They're largely insulated from these decisions. But you know, when the bottom falls out, then people get laid off, they lose their jobs. Can't buy a home, you can't buy a car. It's a genuine nightmare. So look, that's where things stand. Obviously this is breaking situation. So you know, hopefully it's still as up to date whenever we release it but. But that's it.
- [38:56]
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- [40:56]
Saagar Enjeti
Why don't we turn to polling? Just why did Trump decide to do this?
- [40:59]
Krystal Ball
Yeah, I mean this is one piece of that puzzle. I think probably the markets are even more important piece. But let's go ahead and put this up on the screen. This YouGov poll came out yesterday and it was a real eye opener. Approval rating of 33%. That is about as low as I have ever, ever seen it. Disapproval at 62%. Now this is a little bit of an, it's not that much of an outlier. It's a little bit of an outlier. But we've been seeing a lot of polling coming in for him that has the approval rating under 40%. And in fact if we put B3 up on the screen, this is Nate Silver's analysis of his poll number according to his average. And keep this up on the screen for a second cuz this chart is actually really useful. According to his average he now has Trump dipping under 40% approval rating. So 39.7%. I think for an average of all the polls, the ones that are more favorable to him and the ones that are less favorable to him. And you can see quite clearly first of all the trajectory has just been consistently downward. So of course there have been little peaks and valleys in between. But overall the story of his second term in office is just down, down, down. Now the place where he actually saw the steepest decline was after Liberation Day. I mean, the tariffs were just like, wildly, wildly unpopular. And then you can see, though, since the Iran war began, he was actually at a little sort of localized peak there, and it's just been downward ever since the Iran war started. Nate Silver also tracking the popularity of the Iran war and finding that it is very unpopular. Usually Americans love a good war. So it's kind of historically unusual for this country to have be negative on a war, really, from day one. The other thing here, Sager, is put B2 up on the screen. So we called this because it was obviously predictable when Trump and Hexad said, oh, we're gonna need $200 billion to pay for this war, and we're gonna achieve it through reconciliation. Well, that means you have to balance it with cuts elsewhere. Where are you gonna get that money? Healthcare. Because that's basically like the big if you're not gonna cut defense spending the other. And you can't cut interest spending. In fact, that piece is going up interest on the debt because of bond yield surging. The only other place where you have a significant amount of funds is healthcare. So they already cut healthcare significantly back in the one big, beautiful bill. And they are looking at taking another hatchet to healthcare, American's healthcare, in order to pay for the bombs to, you know, to hit Iran and continue this war.
- [43:38]
Saagar Enjeti
I'm like, where would you even cut it from? They said made deep cuts to federal. I'm looking just at even. What would even potentially be.
- [43:46]
Krystal Ball
Yeah, I mean, then you're really. I mean, they're already cut into the bone, but you're really cutting into the bone with that one.
- [43:51]
Saagar Enjeti
And it would be Medicare Advantage. Okay, this is. This is. Yeah. I mean, look, you're cutting Medicare. Yeah.
- [43:58]
Krystal Ball
You're cutting Medicare. That's the bottom line, you know, pro Medicare.
- [44:02]
Saagar Enjeti
Also, you know, boomers taking a little haircut right now, like, oh, what a tragedy.
- [44:06]
Krystal Ball
I was lying. I'd much rather boomers have their health care than not to mention, Sorry, you know, you know, you know, it's Pennywise and pound foolish. Cause then you end up with people at the emergency room.
- [44:15]
Saagar Enjeti
I know.
- [44:15]
Krystal Ball
Getting the most expensive, not getting preventive. I know you understand these things. But in any case, let's talk about how this is gonna play for a midterm election.
- [44:24]
Saagar Enjeti
Right?
- [44:24]
Krystal Ball
We're cutting your healthcare so we can bomb girls schools in Iran and, you know, wage Israel's war.
- [44:30]
Saagar Enjeti
Oh, and gas is more expensive. And any potential housing that you want
- [44:34]
Krystal Ball
to buy, I'm sure people are going to love that. I'm sure people are going to be flocking to the polls to do their patriotic duty of paying more gas at the pump and giving up their health care so that more bombs can be dropped on Iran.
- [44:45]
Saagar Enjeti
I was thinking about it too. At this point, I actually do. I don't say I support more defense spending because that would be the incorrect way of putting it. I do not support an increase in the dollar amount. I do genuinely think at this point we need a Manhattan level project to reform the entire defense industrial base. Of course, under this administration now it's pretty clear that that's just not going to happen largely because of the people who are in charge, but also because of not just corruption, the creative thinking and like ability to take on permanent Washington to basically, we need to make sure that we're safe in a future conflict. Because what has Iran really showed us is the asymmetry problem that we face from drone aircraft carriers with laundry fires, massively expensive interceptors. Like this problem needs to be solved yesterday. It's literally an urgent and a critical situation. And let's say if we ever got into a conflict over something that really matters, you know, one of the reasons why I think this is so bad too is now this poisons the well. People are gonna be like, well, hold on a sec. I'm not gonna give you more stuff so you can go do more stupid shit like this total right, I mean rational right. They're not gonna sit there and give the same soft case that I'm taking.
- [45:49]
Krystal Ball
Here's the point. They already get a trillion dollars. Do you know what Iran's annual milit. It's $10 billion. We're asking for 200 billion just for this one excursion, Right. They spent roughly $10 billion a year on them. I do think they upped it a little bit since the 12 day war or whatever. But yeah, whoever it was that was on the show that was like we built our military to fight the Cold War and it was more about like some big presentation of power than it is the reality of modern warfare. And we've seen the reality of modern warfare up close in the Ukraine, Russia fight, I mean even with Hamas and what they were able to do. We've seen the reality of modern warfare and the more that we obliterated international law, frankly, the more it benefits a country like Iran. Because in an asymmetric fight, yeah, if you have the ability to pick off civilian targets and you know, screw up an oil tanker, bomb a refinery bomb a water desalination plant. And no one can say shit to you because they murdered your head of state and bombed little girls. That is not actually to our benefit. That is to the benefit of smaller players who can use these low cost drones. And of course the number one drone producer in the world by far is China.
- [47:02]
Saagar Enjeti
Yes, of course. See, that's what I'm most worried about. I don't think we need an increase in the defense budget. We need to literally, we could probably spend less if we just took on the actual industrial base, formed our companies, had an intelligent like DARPA Manhattan level, Manhattan Project style like investment and just be like, okay, this is a crisis. And by the way, everyone was saying this is agitating for war with China. Listen, even at this point, like with the whole Taiwan situation, I mean, come on, I don't know how you can look at this and say there's any chance of the US having the ability right now.
- [47:32]
Krystal Ball
Please.
- [47:33]
Saagar Enjeti
I'm not worried about that. You know what I'm worried, I'm worried about Japan, I'm worried about South Korea. I'm worried about. I mean these are real allies. These are people number three, number seven, whatever economy in the world, top 10 trading partners, we're talking about Singapore, Vietnam, the Philippines. I mean these people who have been there with us. This is the backbone of the US consumer market. 50% of global GDP. That's the stuff that I actually worry about right now. And I look at this, I go, oh, it's not gonna happen. I mean, and you could call it doomer or any of that, but I genuinely believe that if we could have done more in the Iran war, we would have it exposed, all of the these so predictable problems. And it's like I said, for years we heard people make fun of the Russians. It's like, what if we're more like the Russians than we wanted to think? It turns out we are. That's just the truth. And I mean, yeah, the level of change this will take from our government. And the thing is, we're a democracy. We have to convince people why this is necessary. And this has actually poisoned the well for any future defense industrial project. Cause people are gonna say, I'm not going to give you more weapons to go out and fight stupid wars. We should only, you know, if you had a doctrine of like rearmament or reform in the system, without all of this insane adventurism, people would say, okay, that makes sense. You know, all of this. And of course, by the way, 200 billion of the $1 trillion is on TRICARE. Last Time I checked, like the healthcare system, it's a disaster from everybody I've spoken to. So yeah, the level of reform and all that we would need would be Titanic. And also this is where doge comes into play. They poison the well. This is, you know, they never even looked over at the Pentagon. Yeah. So I look at this president, I look at this like polling now and I just think about the overall like sweeping Democratic effect that this is going to have. People will very rationally not want to give a dollar more to defense under this administration, cuz they don't want to see more things like this. And then in the interim, we still got what, three more years to go. Let's put B3 up there on the screen from Nate Silver. He makes a point. Trump's approval hits the 30s. Can his numbers get any lower? It's a genuine question. It's one of those where what else could you, what could you do to lift yourself out of this? I don't think in modern history we've ever had a president who has been at this low at this time and had any meaningful recovery. Not look, he's gonna think about legacy, but let's think also generally about the GOP and about the ramifications. So if you see this type of situation take place in, I mean this is where the Senate starts to come into play. Right. When's the last time we lived with something like this? 08. I wanna say 08 with the financial crisis and Iraq, I mean that's when crazy shit happens. Like that's when what were Democrats were getting elected in like North Dakota. Right. Obama won North Dakota. Didn't, didn't Arkansas?
- [50:27]
Krystal Ball
I don't think Obama won North Dakota. But he won't. He won Indiana, North Carolina, North Carolina.
- [50:31]
Saagar Enjeti
North Carolina, he won North Carolina. Didn't like Arkansas have a Democratic senator?
- [50:35]
Krystal Ball
Yeah, I mean part of that, it was just sad. Yeah, I mean part of that is because it was pre, like full partisan realignment. So things like winning in Arkansas and South Dakota were more possible. But yeah, I mean in the 2008, like there were people who won election. I always think about that, that no one thought was gonna be on the table. And the other thing Nate Silver points out, because this question of can he go even lower than the 30s because his base famously very strong, very cold, like et cetera. That is definitely the case. But he does point out that the level of strong approval for Trump has really fallen off. So if you ask people, you can give people these options, not just approve, disapprove but strong disapprove or strong approve? Weak approve, weak disapprove. And the strong approve has fallen from at the beginning of the term it was at 36%. Now it's only 22%. And that's all his base going from like, yes, make America great again to being like, I think he's better than Kamala. You know, I mean, that's, and that's significant.
- [51:38]
Saagar Enjeti
That's the only cope that you have left.
- [51:40]
Krystal Ball
And in a midterm election, that's really significant because look, these are all people. Anybody who approves of Trump is gonna vote Republican if they come out and vote. But if you're feeling like, eh, this is not that great, are you gonna take the time to come out and vote? I mean, it looks. And that's why also 2010 is the same scenario. Yes.
- [51:57]
Saagar Enjeti
Is you have all these disappointed Democrats and they're like, hey, you said you would get us out of Iraq. That didn't happen. You said you would end the war in Afghanistan. We're sending more troops to Afghanistan. You just fucked up my healthcare. I mean, I'm not happy about this.
- [52:11]
Krystal Ball
Yeah. And so, I mean, it's, look, the midterms Democrats just won yet another seat in Florida. It was like really close. It was in a Trump +11 district. This is different than the one that has, that represents Mar a Lago. This is another Florida special election seat. The Democrats just won. I think that means that they've flipped 31 seats since Trump's election and Republicans have flipped zero. I mean, it's very clear where things are trending. The only question is what sort of things Trump's gonna do to try to mess with the elections. But I have to say at this point I'm less worried about that because is, it's one thing when things are marginal. You can screw with things enough that it makes a difference. It's looking increasingly like things are not going to be marginal. Too big to rig.
- [52:53]
Saagar Enjeti
Too big. 2024 and 2026 will be the two big to rig elections, which is really funny. But then let's think about generally what that even means politically. This would be 2008 level sea change. Except within the Democratic Party, there's been all kinds of, of learning. Within the Republican Party, I have no idea. I mean, I don't see a scenario where there are more Thom Tillis types who are willing to buck Trump. But if anything, it'll probably narrow the faithful down to like an extremely small group. But it could be years then in the wilderness. Like, those are Wilderness years where six years, eight years out of power. I mean, who knows, right? And all kinds of crazy stuff happens.
- [53:33]
Krystal Ball
Saga. What do you. What do you make of. Sorry, what do you make of all these reports about, like, oh, J.D. vance is trying to bring the war to a close and he's not happy, and he said, netanyahu, yahoo, you better cut it down, or whatever. What is that coming from his team? Trying to separate. Or what is what's coming.
- [53:46]
Saagar Enjeti
So I think it's. I. I think I. I have no inside knowledge as people. You might suspect many people are very upset with me right now.
- [53:53]
Rory Johnston
What?
- [53:53]
Saagar Enjeti
Yeah. But my theory, and this is based on a little bit of. Of, like, observation and knowledge of the dynamic. A lot of people who were his boosters are very worried about his potential candidacy. And so that is a very convenient. Now here's the problem, though. Those leaks, while could be important for him in the future, are actually extremely detrimental to him in the interim, because any report that the Vice President's straying away from the President is very bad for him in the immediate term. At the end of the day, the calculus is empirically correct. Politically, he has to chain himself at the hip with Trump. That's why whatever Trump does, he has to defend him. Did you see him, given the Iraq comment, in the situation, right, About a suicide bomber?
- [54:35]
Krystal Ball
Oh, God, yeah.
- [54:36]
Saagar Enjeti
I was like, oh, okay, so we're doing this now.
- [54:39]
Krystal Ball
Yeah. When it was like, just imagine if they've got suicide vests that are nuclear bombs and they get. It's like, oh, my God.
- [54:46]
Saagar Enjeti
I mean, that's one of those where. I'll tell you, look, I've been shocked by a lot. I see that, and I'm like, wow. Yeah, like, that's what we're doing now. But that's evidence of the point of this dramatically difficult dynamic, which is you have to chain yourself. If he loses his access to Trump, he lose everything. The Vice presidency is an irrelevant job. Ask Kamala Harris, John Nance Garner, FDR's vice president. It's not worth a warm bucket of piss, I believe is what he said. He hated it. Absolutely hated it. And so it's really only what the President decides to give you. Now, look, there's various different schools of thought because clearly the President doesn't really give a shit what he thinks very much whenever it comes to foreign policy, and it's just gonna make you go out and humiliate him. So. But I do think a lot of the people who are around him, let's say consultants and others, are they're either leaking it or they're trying to like prop up this type of messaging to preserve that optionality in the future. But honestly, the smart play at this, I mean, we're talking now, who knows what things will look like in three years. I've seen Sora Bamari with a guest we've had on. He's very close with JD he wrote a piece and he's like, maybe he won't run in 2028. Maybe he would run in 2032, like some sort of Nixon style. Come back, you know, spend a couple of years in the wilderness, let Marco Rubio be the heir to Trump, you know.
- [55:58]
Krystal Ball
Enjoy.
- [55:59]
Saagar Enjeti
Yeah, enjoy, right? You know, oh, I want to. He's having a baby this year. He's gonna have four kids. Easy excuse. I wanna spend more time with my family, my young family. I could see that as well. So I really have no idea. I mean, if you were to ask me today, that would be a smart play. At the same time, in politics, it's all about timing. Like, we're only gonna be vice president once. People may not care who you are five years from now.
- [56:20]
Krystal Ball
I think the thing I'll say is that for Trump, it is not a good sign that the heir apparent, which is obviously your vice president, either him or his staff, think that it may be politically advantageous for them to try to create some distance from the man who has been the, you know, the kingmaker in the Republican Party.
- [56:40]
Saagar Enjeti
But this is why vice presidents are terrible candidates. They just shouldn't run. Like they really, if you look in history, who are all the vice presidents who really got screwed? Gore Harris, I mean, potentially. J.D. i mean, there's a few successful campaigns.
- [56:54]
Krystal Ball
H.W. bush.
- [56:55]
Saagar Enjeti
Right. But even then he was, you know, he's riding off the coattails of Reagan. When he has to stand on his own two feet, he gets bitch slapped by Bill Clinton. Right.
- [57:01]
Krystal Ball
And Ross Perros helped.
- [57:03]
Saagar Enjeti
You really can see in, like vice presidents empirically then are kind of bad candidates because they're so changed to the status quo. Sometimes you get lucky, like, especially in the modern time, it doesn't work out.
- [57:14]
Krystal Ball
Especially in the modern era where people are just disgusted with the status quo, change election after change election. But I mean, all of the little leaks that they're putting out or whatever they're doing, I mean, at the end of the day, when you decided to cozy up to Trump and be his guy and defend, like, you placed your
- [57:30]
Saagar Enjeti
bet, well, there's a certain bet that
- [57:31]
Krystal Ball
would be the, you know, that would be the Lane. And it wasn't a bad bet politically because he has been so dominant in terms of the Republican Party. But I just think. I mean, it's very possible a Republican project is just destroyed for quite a while for anyone, whether it's him or Rubio or even Tucker Carlson or whatever.
- [57:50]
Saagar Enjeti
Just remember, things change rapidly in American politics. A decade from now. I mean, a decade ago. Are you really gonna say Trump is gonna stick around and still be the President of the United States? No, nobody would say that. Right. Remember, 40 more years. So never make grand pronouncements about it's over for forever. It could be over in the interim. Six to eight years, something like that. And I think American history, modern American history, shows us genuine dominance would be the FDR to Truman pipeline of about. What was that? 20 something years. 24 years. Right. Of Democratic rule. That's about as good as you can get, I think, in America.
- [58:18]
Krystal Ball
Yeah.
- [58:19]
Saagar Enjeti
And so, yeah, large majority, things change very rapidly. But for Vance, I mean, I actually was thinking about this earlier, not. Sorry to go on a bit of a tangent, but he was at a donor retreat yesterday with a lot of tech people and a lot of them are very pro AI. And I was like, you know, that's like the wrong side of that issue. Right. So you've got. I mean, it's not me saying this like, Republican voters are like, hey, I don't want these data centers here. Right.
- [58:42]
Krystal Ball
Voters, period.
- [58:43]
Saagar Enjeti
Right, Voters, period. But I'm saying even Republican voters, they are not on board with a lot of the AI policy out of this current White House. They're not paying attention per se. But data center is gonna be a critical issue, I think, especially in the energy crunch after this nonsense. Yeah, we're gonna pay higher bills to make sure that Google's AI can't and create black Nazis in Gemini. Like, no, we're not doing that. So I was thinking about that too. About. I actually think the insurgent lane in the Republican Party is probably more open than ever before. Like, somebody could do to the Republican Party today what Trump did. Somebody has to be so disconnected from the system to be able to stand on the stage and be able to be like, Donald. No one's ever told you this, Mr. Vice President, Iran was a disaster. You know, maybe you need somebody to be able to say that.
- [59:30]
Krystal Ball
I mean, maybe. But at the point, we're still at a place where the Republican base.
- [59:33]
Rory Johnston
Right.
- [59:34]
Krystal Ball
They may not be in love, but
- [59:35]
Saagar Enjeti
they're saying, let's say years from now.
- [59:37]
Krystal Ball
Possible. That's possible.
- [59:39]
Saagar Enjeti
It probably couldn't happen in 2028. And maybe it can't really happen while Trump is still alive. But look, he's 80. Who knows 10 years from now what that would look like? So yeah, same thing like Iraq 10 years later. Somebody can come along. Let's say any Trump aligned official is running and tell the truth and just say the truth about what happened with Iran. I may be wishcasting. I don't know how things will work out. Obviously.
- [59:59]
Krystal Ball
Last point I'll make, put sorry B3, Nate Silver's thing back up on the screen for the third time here. But I wanna make a point about, look at each of these moments that where he really suffers a significant decline. So first you have the Liberation Day announcement. So none of these are external crises. These are all things that Trump himself did. Right. So the Liberation Day tariffs, dreadfully unpopular and a chaotic mess. Even we're people who are sympathetic to targeted tariffs. This, this was idiotic. Okay, Justice Department declares Epstein investigation over again. The whole Epstein thing, total own goal mess, disaster, really damaging to his brand. Government shutdown begins again. These are political problems that he could have handled differently. Then you have Renee Goode killed and of course Alex Preddy a week or so after. This was again all because of his choice to occupy the city of Minneapolis. After Nick Shirley does his like Somali fraud thing and then the Iran war starts. I mean, in a sense he's been so fortunate. There haven't been a lot of really any major external crises in this administration. This is all of his own making every one of these decisions. And Doge was not even on. There was also ended up being a total cluster and profoundly unpopular, et cetera, even though it started off with people sort of open and receptive to it. So I mean, that's why I do think that the damage to the Republican Party could be relatively severe. Because it's one thing like you're dealing with coronavirus, it's not your fault. And everybody's struggling to deal with it. I mean, obviously there were moves that were made by the United States of America that helped to spark the Ukraine, Russia war. But that ultimately is also like an external event. At least it's perceived that way by the general public. These are all choices that he made that every single one of these fricking people were out there defending. So I mean, that's part of why
- [61:56]
Saagar Enjeti
it's very Iraq level. Yeah, very similar.
- [61:58]
Krystal Ball
That's right.
- [61:58]
Saagar Enjeti
That's why Iraq just nuked them.
- [62:00]
Krystal Ball
That's right. And Iraq started off so much more popular and honestly had less of a direct impact on our lives than this is already having outside. Obviously, you know, there were, you know, severe casualties and American service members who were killed, but unfortunately the reality of service in this country at this point is that it's confined to it's sort of like segregated off from a lot of the population. So in any case, you know, certainly he's looking at these polls and feeling like things are not going too great for which part of what played into potentially the attempted taco?
- [62:28]
Saagar Enjeti
Yep, that's right. All right, we've got our friend Rory standing by. Let's get to it.
- [62:33]
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- [63:33]
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- [64:33]
Saagar Enjeti
Joining us now is our great friend Rory Johnston. He is the founder of Commodity Context on Substack, which we highly recommend everybody go and subscribe to. There will be a link down in the description. Thanks for joining us, man. Appreciate it.
- [64:44]
Rory Johnston
Thanks for having me back.
- [64:45]
Saagar Enjeti
All right, so, Rory, let's start with your reaction to the Trump taco. It's Taco Tuesday. Let's put this up here on the screen. All of those countries that can't get jet fuel because of the Straits of Hormuz, like the United Kingdom, which refused to involve the decapitation of Iran. I have a suggestion for you. Number one, buy from the U.S. we have plenty. Number two, build up some delayed courage. Go to the Strait. Just take it. You'll have to start learning how to fight for yourself. The USA won't be there to help you anymore, just like you weren't there for while A Iran has been essentially decimated. The hard part is done. Go get your own oil. So as the premier oil analyst, how's that gonna work?
- [65:18]
Rory Johnston
I mean, it's just a wild statement from a US President. I think just on two points here. Actually, let's go to a third point as well. So hard parts done. You do the rest. Obviously, the rest is the part that's too hard for Trump to do himself. So I would say at this stage, it's not, not entirely sincere, although that's not shocking in this environment. I think the part that really hits like a, like a hammer, though, is the go get your own oil exclamation mark, which is essentially like the epigraph on a book about the end of the Carter Doctrine, that the United States has been the policeman in this region of the world for decades. It has been the guarantor of these oil supplies and for the regional security of the government, engulf kingdoms, engulf states, engulf oil exporters. It's a complete rewriting of how this situation in the Middle east works. And when we're talking about the unilateral Taco, I think I kind of see the two most likely scenarios here as the really, really bad scenario where the global economy goes into a deep recession. We get $200 plus oil. That is the scenario, I think, that we've been grinding towards steadily and disconcertingly of boots on the ground trying to take Carg island et CETERA et cetera. That's where you get prolonged closure of the strait. You get risk of further attacks on regional oil infrastructure. Things that can't just be undone, things that are permanent or at least years long, durable. I think that's a scenario. But I see that is so dire that I see it as very difficult to hold as my base case, because I just don't think that any politician. Lisa, lay alone. Donald Trump has the wherewithal to go through with kind of something so long and arduous like that. I think more likely here is the other scenario, which is my base case from the very beginning, which has been what I call the unilateral taco, which is people like, well, Trump can't just taco. This is not tariffs. This is not trade policy. There are multiple participants in this war. He can't just decide by himself. I humbly disagree, and I think that Trump would likely disagree with that as well. I think if we've seen anything about two Trump, he's not bound by precedent, he's not bound by allies, not bound by anything. And I think he's very clearly already bored of this war. I think by this stage, he planned to basically be rolling over onto Cuba. I think. I never thought that Trump planned to get this deep, and he never had a plan. For once, he was this deep. So I think if the consequences keep ramping, and I don't think this is over yet, I think that we still need higher oil prices and lower equity prices and more economic pain to force that unilateral taco. But that's how I see this eventually going, is that one day we're just going to get a post. It's like it's done, you know, US Navy sailing home. That's how I pitched this ending.
- [68:00]
Krystal Ball
Let's put C0 up on the screen. We're now officially at national average over $4 a gallon for gas. So a significant and not great milestone being reached here. Let's say that he does the full taco. Go get your own gas. We're out. Straight up Hormuz. There's new reality. There's new sheriff in town. We're going to let Iran charge their toll and you can do deals with them and Chinese Yuan. We're out of here. Okay. Let's say that that is what happens. What is the damage that's already been done, and how will that trickle throughout the global economy?
- [68:36]
Saagar Enjeti
Yeah.
- [68:36]
Rory Johnston
So the one thing I want to kind of stress here is that in no reasonable scenario coming out of the Iran war, do I see the oil market being in a healthier or more secure position than which it entered the war.
- [68:48]
Krystal Ball
Yeah.
- [68:48]
Rory Johnston
So I think, you know, any scenario is going to have structurally higher prices. I think in the scenario where you have, you know, a boots on the ground drag out $200 plus. I think in this scenario of a unilateral Taco, Iran having some kind of sovereign control over the Strait, which again, is just an unthinkable thing to kind of consider long term, but that's what we're looking like. We're at least trending towards possibly in that scenario. I still think that oil prices currently, I'm looking at my screen, Brent's just about 117. I think that's still too low. I think that even though this unilateral taco is bearish or a lower price environment than the boots on the ground scenario, I think both of them are still dire and a deeply untenable supply situation. I think in the scenario where Iran does continue to control the Strait, then we're just going to. It's just setting us up, very predictable, arguably for the next crisis. I think this is like, this is a situation that can't last. It is inherently politically untenable and unstable and we're going to get the next flare up. So we go from a long, drawn out, awful Hormuz closure to maybe like a perennial two week closure in Hormuz, which seems like an insane thing to bake into the system, but that's kind of, again, what it's looking like we might be arriving at.
- [69:59]
Saagar Enjeti
Yeah, it really does. Let's go and put a nine guys up on there on the screen. That's the bill that is being passed through Iran. They say that they would impose a toll system in Rials, that they would ban passage of US And Israeli vessels through the Strait, assert Iranian sovereignty over the airway strategic waterway, ban any country that imposes unilateral sanctions against Iran. Oman slated to help shape the legal framework.
- [70:23]
Krystal Ball
By the way, that Omani piece is actually pretty significant.
- [70:25]
Saagar Enjeti
Yeah. So, Rory, I mean, let's game this out. I was thinking earlier, I go, how could you be the Gulf countries where you have to. You just got bombed by these people and now you have to pay them some sort of toll. And maybe they won't even want money. And they're like, bombs keep coming unless the bases go. But like, that seems to be the reality. I mean, the uk, Japan, South Korea, all of these Asian countries, they would have to pay. I mean, I don't even know how they could get Rials, by the way. I mean, is there a market to exchange? Like talk us through what that would look like?
- [70:58]
Rory Johnston
Yeah, so just let's talk through the size of the toll first. Cause I think what we've seen discussed so far is $2 million passage, which sounds very expensive. But relative to like a VLCC or a very large crude carrier tanker, the largest ones that are typically used, they carry about 2 million barrels of crude. So that's only about a dollar a barrel on toll. That is expensive. But relative to the current deeply, deeply problematic status quo, it is a clear kind of beneficial change to the global supply situation. But to your point, the politics of this are deeply untenable. And it seems unlikely that Iran would allow a complete reopening of the strait again. Prior to the war, we were having about 100 plus 100 to 120 vessels crossing the strait every day. You know, maybe we get back up to 50% of that then with some of the offsets that we have in the system like the Saudi east west pipeline and other and other sources, maybe we get back to something that's, you know, just a deep deficit rather than a catastrophic supply deficit. But I think that's the scenario is that we just have some kind of durable control for Iran in this region. And the Gulf countries kind of having just need to swallow the bitter pill because the alternative is existential for them. This, I think is existential for them as well. But at least it is a scenario where they continue exporting their oil and restarting their economies relative to right now, where virtually, I mean, by far their largest economic sector is completely sidelined.
- [72:27]
Saagar Enjeti
Right.
- [72:28]
Krystal Ball
The other thing Trump says offers as a solution other than go get your own oil and good luck militarily in the Strait of Hormon, hey, come buy from us. We've got plenty of oil. Can you talk about how our supply fits into the global oil markets and the reality of what that looks like as well?
- [72:46]
Rory Johnston
Yeah, definitely. So let's say Europe is the deal, because I think that's kind of who he's aiming this tweet at. In terms of the UK reference, the UK and Europe more broadly is a net importer, what we call middle distillates. So diesel, jet fuel, etc. Etc. Historically, Europe got that from Russia. Following 2022 and the invasion of Ukraine, they banned the import of Russian oil and gas. And increasingly they turn European importers turn to the Middle east and the Gulf for those supplies. So this is obviously particularly acute for them. You can actually the United States is a net exporter of diesel and distillates, largely those current cargoes go to Latin America. Mexico is the largest single recipient recipient. So if, if Europe started to overbid those one, they'd be paying a very pretty penny for them. And you'd essentially be taking those flows away from Latin American importers, which are going to be in a different entire world of hurt. But I think also what's further going to complicate this is if this crisis continues and if prices get, get higher and more volatile, I think the one thing that a lot of people, a lot of analysts have been watching for is any signs that, that the Trump administration is going to, to pull the trigger on some kind of trade restrictions, which obviously I think, I mean, the ultimate rug pull here would basically be that Trump starts the Iran war, destabilizes the strait, leaves and says, by the way, your problem, go get your own oil or buy from us. They're like, okay, we'll buy from you. And he's like, actually, we're gonna ban the export of diesel in the first place, so go find it somewhere else. Like this is. It's a recurring cycle of kind of bad faith negotiations and diplomacy leading to just a situation that, that is, you know, sure, the United States, relative to a lot of the rest of the world, is going to be in a relatively better spot because a lot of domestic production, I'm up in Toronto, you know, you have secure supplies of Canadian crude into the US Midwest in particular, that can't get enticed away to other regions. So the United States is in a good spot. But the United States exists in a global economy, and the US can, you know, no matter how strong the US Economy is, it's going to feel those bumps that buffeting from a global economy if it's under that retrenchment of this recessionary pressure.
- [74:55]
Saagar Enjeti
Something I've really learned from you, Rory, is about why an export ban would be a bad idea. You've talked actually about refinery capacity, about the various different types of refineries and what they're built for. Some of it's for foreign oil, some other foreign refineries built for US Oil, about how much that would distort the global market. So when people say, when Trump says, you can come buy from us, I think what you're trying to hammer home is, yeah, they'll come buy from us, but we have to buy ours too. And that's really gonna be expensive. So it could still be a $6 a gallon type scenario, depending on where the crude oil market and all of that goes, not to mention, I mean, I know you're not an LNG expert either, but like, that is also kind of critical, last time I checked for Europe. Could you just talk through that about why you're kind of screwed either way? If you do an export ban, you really would hurt the US Market kind of forever. And if you don't, we are also still going to have to pay sky high prices.
- [75:45]
Rory Johnston
Yeah, just to your point, even aside from the crude quality and the kind of refinery slate stuff, even just on the product, product side, if the US Gulf coast is a net exporter of diesel and jet fuel and other products like that, whereas the east and west coast are net importers of gasoline, the relaxation and kind of suspension or waiving of the Jones act could allow some more of those Gulf coast barrels to the coasts in a way that could help an autarkic kind of US Petroleum trade work without completely breaking. But fundamentally you need these export markets in order to clear additional, let's say, excess diesel from the US Gulf Coast. If you banned the export of that, it would initially manifest as what the White House would see as a great thing, which is you'd have excess supplies, you'd have inventories that built up, you'd have depressed diesel prices domestically, briefly, which is going to sound like a great thing for a couple of weeks until that surplus of diesel ends up forcing those Gulf coast refineries to reduce their run rate rates because they can't put their diesel anywhere. And that means that you would end up in a situation where you could actually end up running out or having a scarcity of gasoline in the US Gulf coast, which would be an insane thing. One thing I keep saying is that for advanced economies this will largely manifest as a debilitating price shock because we will be able to. We have very low price sensitivity, these fuels. I like to say, like I'm driving my kids to school, regardless of how high the pump prices. But much of the world does not have that scenario. And they're going to feel the weight of this through supply losses, losses, but as soon as actual scarcity and the lack of supply. But the way you can short circuit that ability for us to pay for these fuels is by beginning to muck with trade. And I think that is the temptation here. And again, that's my worry of if this keeps going where we could be headed.
- [77:29]
Krystal Ball
Yeah, let's put C5 up on the screen. There was an announcement from Russia. They're planning to ban gasoline exports starting on April first, first, you know, Russia obviously major oil producer, a significant global supplier. What is the significance of this?
- [77:48]
Rory Johnston
Yeah, so I think you're seeing a lot of countries around the world. Russia is one example, China is another example, I think even more critically that has banned the export of refined fuels. In 2022 they were a very important swing producer into that diesel starved market. With Russia, specifically, Russia isn't often isn't typically it's a very, very minor net exporter of gasoline. And ever since Ukraine's attacks on domestic refining infra infrastructure, it's increasingly actually been pushed into a scenario of net imports. So the reason that they're banning exports is to kind of try and hold back as much of that gasoline as possible. The bigger concern would be if you started seeing Russia banning the export of diesel because unlike gasoline where they're a minor export player, diesel, they're a major export player. More like a million barrels a day versus let's say gasoline at 100,000 barrels a day. And in that scenario again, diesel in middle distillates the tightest area of the market. That would really, really hurt in terms of those refining margins and crack spreads and the prices you and I see at the pump. But one thing on Moscow, I keep repeating this, that Moscow is the single largest beneficiary of the Iran war, both in terms of an overall higher price environment, explicit removal of sanctions by the U.S. treasury against Russian and shockingly in this context, even Iranian crude. And I think all of the pressure that the White House had very successfully imposed on the Russian oil industry over the past eight, nine months, that was undone in a month. And I think we're back to square one. And I think the one rub to this is that the one person who knows this has been a boon and likely a windfall for Putin is Zelensky. And what we've seen over the past couple of weeks is Ukrainian forces dramatically ramping up attacks against Russian export infrastructure. Last week Reuters had at 40% of Russian oil export infrastructure was offline was the largest disruption to Russian supply in modern history on top of the largest supply shock in the oil market's entire history happening in the Gulf just entirely separately. So there's this pro cyclical element now that the higher oil prices go, the more pressure Ukraine is going to put on Russian exports and that's going to put prices higher and again ramp pressure
- [79:57]
Saagar Enjeti
further, even more geopolitical spiral. My last question for you man is let's put C3. I love the this map that you put out there. I believe it was made by JP Morgan, which shows the actual, like the. You said where the air pocket, which is kind of the way you could think about the supply loss, is moving through the world. So East Africa was already hit. East Asia this week. We're literally about to do an entire block about all of the global chaos and South Korean president being like, I can't sleep at night. Europe next week. And you say North America, two more weeks. Now, the Secretary Hegs, Seth took the podium this morning, basically refused to give some sort of a timeline. The war is not going to end today, that's for sure. It's going to end sometime in the future. But you're saying two weeks coming up on that. What does that look like? We're already at $4 a gallon here in the U.S. nationally, let's say two more weeks. When that pocket hits us, how does that manifest? Are we going to have supply shortages? Are we going to be Australia with petrol stations that are closed? What's that look like for us?
- [80:53]
Rory Johnston
So I think the United States, like I was saying earlier, is in a beneficial and kind of privileged position that it likely won't immediately run into any major physical shortages. But to your point of like US average gas prices already back over 4 bucks a gallon, the price pressure is going to keep coming. So like that chart shows that that air pocket, and just to get to give the logic of this, before the war you had tankers leaving the Gulf fully laden with crude. They take upwards of a month or a month and a half to get where they're going. You're not going to feel the loss of those supplies in the closure of the strait until that final tanker reaches your shores, behind which there's nothing but air. That's the air pocket. That air pocket is landing in Asia likely this week, Europe next week, and North America two weeks after. But if you look at that chart, North America also doesn't get that much oil from the Gulf anymore. It used to get a lot more shale revolution. And growth in Canadian production has largely displaced those barrels. But we got we end up back in the situation that is still an importer of, or is still an importer of various fuels on the coasts and of crude oil in the Gulf because of quality issues, those barrels that are imported are going to have furious demand and competition for them already. And as Asia starts drawing down stocks because that air pocket has arrived, and then Europe next week, that's when you're going to see mounting and ever more pressure. And one thing we keep talking about is this dis disconnect between paper or financial futures and crude and the physical market underlying these industries that has remained fairly wide. When that air pocket lands, it's going to, it's going to kind of wedge those things together. We're going to see way more of that physical pressure manifest in the prices that we see on our screen.
- [82:31]
Krystal Ball
And Rory, if you could best, you can sort of bottom line it for consumers who are listening, like what should their expectations be over the coming weeks at what they're going to pay at the pump?
- [82:40]
Rory Johnston
It's going to be a very, very expensive driving season. Like, you know, easily the most expensive driving season since 20. And if this continues through April and further, we will very, very likely see all time high pump prices and surely all time high diesel prices in the United States.
- [82:58]
Saagar Enjeti
Great. All right. Well, heading into good weather, but got
- [83:02]
Krystal Ball
a note of plan.
- [83:03]
Saagar Enjeti
We trust you and you are not a sensational person. That's one of the reasons I really enjoy speaking with you, everybody.
- [83:08]
Krystal Ball
Well, he is a sensational person, but not a. Yeah, sorry, not a sensational list. Thank you, Ursin.
- [83:13]
Saagar Enjeti
He's not. What is it? What's the term? Perma bull. You're not a perma bull in the oil space. Everybody go follow Rory and subscribe to his substack. Thanks, man. Thank you for joining us.
- [83:22]
Rory Johnston
Thanks for.
- [83:40]
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- [85:09]
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- [85:11]
Krystal Ball
Guaranteed Human.