Overnight, the kinetic action returned to the Strait of Hormuz.

Let's revisit the path that got us here.

We'll start with this excerpt from my February 2025 note, just a couple of weeks after Trump was sworn in: 

Dealing with China is priority number one … the Trump 2.0 trade war with China will likely require global participation (maybe putting China in the trade penalty box). 

 

It's a multi-front fight. It's fighting to rebalance global trade, and weaken the global reliance on China (weaken China's economic and political leverage). 

As we discussed at the time, China was at the core of nearly every geopolitical move being made. Mexico and Canada were pressured over fentanyl, which comes from China.

Panama and Greenland were about shipping lanes, and keeping them out of China's hands. On the day Rubio visited Panama, Panama announced it would exit China's Belt and Road project.

Then tariffs. 

The tariffs were never about revenue. They were about realignment. Use access to the American consumer as the leverage, and draw the rest of the world back toward the United States (away from China). 

It worked. Country after country came back to the table.

Not China. China retaliated, built workarounds, and has stalled.

Then Venezuela, China's "all-weather strategic partner." 

This began the dismantling of energy as a geopolitical weapon — a funding source for global chaos, influence, and a tool for economic disruption.

In a cabinet meeting in May, Trump turned to Marco Rubio and asked what was going on in Venezuela. Rubio laid out the mechanism in public. 

He said, the industry is being "professionalized for the first time ever."

The crude is sold "in the market at market rates." And "the money is going to an account in the United States controlled and monitored by Treasury, audited by KPMG. And it's for the first time ever, the money's not being stolen. It's going to the benefit of the Venezuelan people."

That was the Venezuela model stated by the Secretary of State. A Treasury-controlled account. KPMG audit. Market sales. Revenue restructured away from the regime, toward the people.

Eradicate the regime. Take control of the oil. Remove the regime's funding and leverage.

That was a clear signal for what was already underway in Iran.

And remember, on Iran, forty-years ago Trump told Barbara Walters that the next time Iran threatened this country, America should go in, grab one of their big oil installations, and keep it.

In 1988, he told The Guardian he'd do a number on Kharg Island, and take it.

This past March, he told the Financial Times that his favorite option is to take the oil in Iran.

And with that, there has never been a peace deal scenario that would change the control architecture of oil in Iran. The Venezuela model has been the model for Iran. Take the oil, professionalize the industry, sell it at market rates, and run the revenue through a Treasury-controlled account, so the old regime can't reconstitute itself on that money.

Which brings us to the isolation strategy.

Last week, Scott Bessent (U.S. Treasury Secretary) started the clock on the economic isolation of Iran, and put every country still buying, shipping, insuring or banking the Iranian trade on notice.

He said, any entity that facilitates money laundering on behalf of Iran will be removed from the US dollar system.

Who does it put in the crosshairs? China.

China takes as much as 90% of Iran's oil exports.

As we discussed last week, Venezuela was the model for Iran. And the economic isolation of Iran is now the model for China.

This, as Xi is due for a formal state visit, in America, on September 24th.