LARRY KUDLOW: Trump has never ruled out military action, which now looks more likely

The market implication is less about the rhetoric itself and more about the jump in tail risk for the Strait of Hormuz. Even a partial interruption would create an outsized oil-and-freight shock because the marginal barrel is already priced off uninterrupted passage; the first-order winners are upstream energy, LNG exporters outside the Gulf, and U.S./allied defense contractors with air-defense, munitions, and maritime surveillance exposure. The more interesting second-order effect is inflation persistence: a sustained spike in crude and tanker insurance would tighten financial conditions just as policymakers are trying to lean against growth, which raises the odds that rate-cut expectations get pushed out.

Sanctions pressure plus asset liquidation rhetoric also changes the economics for gray-market logistics, crypto rails, and regional banking. Counterparty risk rises for any firm with Gulf payment exposure or inventory transit through the Red Sea / Hormuz corridor, while non-Gulf refiners with access to alternative feedstock can see margin expansion if prompt crude dislocations steepen the curve. If shipping flows are constrained, expect widening spreads between Atlantic Basin and Middle East-linked freight-sensitive names, and a relative bid for energy infrastructure and pipeline assets that are less exposed to maritime chokepoints.

The key timing risk is that markets may initially fade the headline unless there is a visible operational step-up: sanctions enforcement, naval posturing, asset seizures, or a confirmed attack/retaliation cycle. Over days, crude implied volatility is the cleaner expression; over months, the trade becomes about whether disruption turns into a sustained production and transit outage. The contrarian angle is that a maximalist public stance can still be a negotiation tactic, so the right way to express it is via options and relative-value, not unhedged outright beta.