Prof G Markets – War With Iran: Why Oil Didn’t Spike As Expected

Date: March 3, 2026
Hosts: Ed Elson (Vox Media)
Guests: Matt Smith (Oil Analyst, Kepler), Alex Heath (Sources Newsletter, Access Podcast)

Episode Overview

This episode unpacks two seismic news stories shaping markets:

1. The outbreak of war between the US/Israel and Iran—with a focus on why oil prices haven’t spiked as dramatically as many anticipated, and
2. OpenAI’s record-breaking funding round and the Anthropic–Pentagon dispute, delving into how geopolitics is shaping the direction of the AI industry.

The hosts blend real-time financial insight with rapid reactions to world events, offering listeners an accessible, pragmatic take on the mechanics and consequences behind today’s headlines.

1. Markets and the War with Iran

Key Segment: [02:00 – 13:18]

News Recap and Market Reaction

• US and Israel have struck Iran, killing its Supreme Leader. Iran has retaliated across the region, including on US bases.

• Despite this, major US stock indices ended higher after initial volatility.

• Oil spiked to $77/barrel but not as much as many expected.

  • Notable Quote:
    "There was the expectation we could open up 15, 20% and we only opened up 12%... we closed up about 7. So, not the worst case scenario."
    — Matt Smith, 03:40

• Key Commodities Movement:

  • Diesel soared 15% after a major Saudi refinery was hit.
  • European natural gas prices surged nearly 50% after a Qatari LNG terminal strike.
  • The conflict has ripple effects on fertilizer and other sectors.

Why Didn’t Oil Spike More?

• The "Worst Case" Did Happen (or Almost):

  • Reports of Iran closing the Strait of Hormuz, a vital chokepoint.
  • Yet, oil didn’t "absolutely rip"; instead, the market reacted more moderately.

• Market Psychology:

  • "Maybe it's just because... these strikes are going to be persistent... perhaps people are thinking this is going to be a short-term event and we're going to get over this in a few days."
    — Matt Smith, 06:00

• Hitting Iran Hard = Long-term Stability?

  • If the US obliterates Iran’s military/nuclear infrastructure, uncertainty may drop, and oil might flow more freely post-conflict.
  • "Once you get past that... the likes of Iranian barrels could even flow stronger."
    — Matt Smith, 07:27

What Do Oil Investors Want?

• Above all: Stability—in price and geopolitics.

  • Removing Iran as an uncertainty is seen as a positive for future investments.

• "I think oil investors want stability in terms of the geopolitical backdrop... Certainty, understanding what the path forward is."
  — Ed Elson & Matt Smith, 09:40

• Sanctioned Barrels & Market Structure:

  • Iranian, Russian, and previously Venezuelan oil flow at steep discounts (mostly to China/India).
  • If sanctions fall post-conflict, more oil could flood the open market, pushing prices down.

Potential Blind Spots

• Investors might be underestimating uncertainty: war could drag on, bottlenecking exports and causing significant price/pump pain.
• "If this issue gets cleared away, you have one less uncertainty... We could really head considerably lower from where we are. Positive for consumers, not for oil investors."
  — Matt Smith, 11:54

Memorable Segment

[10:00 – 12:00]

• Discussion about how the fundamental oversupply in the market could trigger lower oil prices if the risk premium dissolves.

2. OpenAI’s $110 Billion Raise & The Anthropic–Pentagon Drama

Key Segment: [15:47 – 29:19]

OpenAI Sets a New Fundraising Record

• OpenAI raises $110B in the largest private funding round ever; $730B pre-money valuation.

• Amazon ($50B), Nvidia & SoftBank ($30B each) led the round.

• Demand outstripped supply—oversubscribed by $10B.

• Quote:
  "They just need money. And there's finite pools of it left for these size of rounds."
  — Alex Heath, 18:47

• Strategic Shifts:

  • OpenAI is partnering closer with Amazon, as their Apple partnership fades.
  • AI "mega-rounds" increasingly blur distinctions: Amazon is a major shareholder in both OpenAI and Anthropic.

The Anthropic–Pentagon Battle

• Anthropic blacklisted by Trump’s administration for refusing to loosen AI guardrails for military/espionage use.
• OpenAI quickly stepped in to secure a Pentagon deal.
• Notable Quote:
  • "Trump has called Anthropic a, quote, radical left AI company. Anthropic has been blacklisted as a supply chain risk." — Ed Elson, 19:51
• "It's interesting that OpenAI swooped in and got a deal. That is what Anthropic said it wanted. Shows that OpenAI can be shrewd."
  — Alex Heath, 22:43

Broader Implications & the Role of Values

• Anthropic’s stance on ethics (refusing to support mass surveillance/autonomous weapons) is boosting its consumer brand.

• Claude, Anthropic’s chatbot, hits #1 on the US app store after a consumer backlash against OpenAI.

  • "It seems as though the politics of this is actually shaping the trajectories of the businesses themselves."
    — Ed Elson, 23:22

• Is this a long-term win for Anthropic or a blip?

  • Reminiscent of past boycotts like #DeleteUber, which ended up being short-lived.

• Alex Heath’s take: Public opinion can drive short-term consumer shifts, but government contracts and long-term business health are another matter.

  • "Maybe that's the difference, OpenAI was willing to operate in the constraints of how the law works today... Anthropic was not."
    — Alex Heath, 25:30

• Memorable quip:

  • "You're seeing that with your partner Scott’s... unsubscribe movement. This is something people can latch onto to express the beliefs they have. And that's American, and that's awesome."
    — Alex Heath, 28:31

3. Final Thoughts: What War with Iran Means for Ordinary Americans

Key Segment: [29:33 – end]

• War will dominate the news, but everyday effects are likely:
  • Gasoline: Every $5 increase in oil = approx. +10 cents/gallon at the pump. If oil spikes much higher, US consumers will feel it.
  • Natural Gas: With 20% of global LNG passing through Hormuz, and US exporting to Europe (especially if Europe needs more due to blocked Mideast supply), US heating and electric bills could rise as in the Russia/Ukraine crisis.
  • Market Volatility:
    • "Investors now have more reasons to panic than at any time in recent memory… which will make all of us even more anxious than we already were." — Ed Elson, 32:30
    • Speculative investments out, “safety” and stability are now dominant investor priorities.
    • "Now the consensus on Wall Street is pretty clear: we're not so safe anymore." — Ed Elson, 33:10

Notable Quotes & Memorable Moments

• "There was the expectation we could open up 15, 20% and we only opened up 12%. … So not the worst case scenario."
  – Matt Smith (03:40)

• "Once you get past that, the uncertainty is lifted... the likes of Iranian barrels could even flow stronger."
  – Matt Smith (07:27)

• "They just want money. They just need money. And there's, there's finite pools of it left for these size of rounds."
  – Alex Heath (18:47)

• "It seems as though the politics of this all is actually shaping and shifting the trajectories of the businesses themselves."
  – Ed Elson (23:22)

• "At the end of the day, it's good that this can happen... one of the most positive reads... is at the very least, what Amadeia has done is shine a light on how we should be thinking about AI used in these contexts."
  – Alex Heath (28:31)

Key Timestamps

• [02:00] – Markets’ initial reactions to the Iran war and commodities recap.
• [05:24] – Why didn’t oil spike more than it did?
• [09:07] – What do oil investors want from the conflict?
• [11:54] – Potential investor blind spots and market oversupply.
• [15:47] – OpenAI’s fundraising details and implications.
• [19:51] – Anthropic–Pentagon dispute explained.
• [24:23] – Will Anthropic’s principled stand pay off?
• [29:33] – What the war means for US consumers (gas, LNG, investor sentiment).

Summary Tone & Takeaways

The episode delivers "no mercy, no malice" analysis of an unusually volatile moment, blending institutional insight with plain-language explanation. Key takeaways include a nuanced perspective on why oil didn’t explode despite war in the Gulf, investor psychology under geopolitical risk, and how tech giants’ choices on national security are abruptly impacting consumer sentiment and potential futures of their businesses.

The upshot: uncertainty is up, markets are jittery, and investors—large and small—are shifting toward safety in all forms. Meanwhile, AI’s next era will be shaped as much by politics as by technology.

For more, subscribe to Ed Elson’s newsletter at edwardelson.substack.com or catch the next episode of Prof G Markets.