week 5 and 50k soldiers

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We are into Week 5 of the US-Iran War

The Houthis entered the conflict. 3,500 more US Marines arrived in the Gulf. Iran hit a major US air base destroying an AWACS aircraft. And in the middle of all this, there is one genuinely positive development that markets will notice this morning.

Let’s get straight to it.

🪖 50,000 US TROOPS AND COUNTING.

US deployed another 3,500 sailors and Marines to the Middle East over the weekend. They are intended to be part of the effort to open the Strait of Hormuz.

US Central Command now has over 50,000 personnel in the region. The total includes carrier strike groups, marine expeditionary units, paratroopers, and additional forces deployed throughout the Gulf.

Iran's parliament speaker told his people this weekend that Tehran's forces are "waiting" for a US ground invasion and are prepared to resist. The war is entering a phase where both sides are sizing up whether the next move is diplomatic or military. With 50,000 US troops now in theatre, the stakes of that question are enormous.

Pete's Take 👇

The last time Trump sent two aircraft carriers to the Gulf, most analysts thought he was bluffing (a.k.a. TACO) that he will back out. However, Trump surprised everyone by launching air strikes on Iran. So this time, I think it will be foolish to assume it is another TACO. However, I believe it can also be Trump positioning himself into a favourable position for negotiation with Iran. 

As I have mentioned before, if Trump launches an all-out ground attack then it will be really bad for the midterms as bodies pile up. There are rumours that US is planning a surgical strike to take out nuclear materials in Iran. That seems more likely but the execution seems almost impossible as Iran is aware and prepared for it.

🇾🇪 THE HOUTHIS ENTER THE WAR.

Yemen's Iran-backed Houthi rebels fired two missiles at Israel over the weekend, marking their first military action in the current conflict. The movement previously attacked Red Sea shipping during the Gaza war, driving up global shipping costs and forcing major operators to reroute around Africa.

The Houthis control most of Yemen's Red Sea coast and have warned that closing the Bab al-Mandab Strait at the southern entrance to the Red Sea "is a viable option." Nearly 15% of global maritime trade passes through the Red Sea.

Think about what that means in combination. The Strait of Hormuz at the top of the Gulf is already effectively closed. If the Houthis shut the bottom of the Red Sea as well, global shipping would have lost two of its most critical routes simultaneously. The only route left for energy from the Middle East to Asia and Europe would be around the Cape of Good Hope in Africa, adding two weeks to every voyage.

Pete's Take 👇

The Houthi entry into this war is the development I flagged last week as the one to watch. If they move from symbolic missile launches to sustained attacks on Red Sea shipping, Singapore will get hit directly. Container volumes. Port revenues. Energy costs. This is not a remote risk. This is a direct line between what is happening in Yemen and what happens to freight costs and energy prices in Southeast Asia.

🛢️ SOME GOOD NEWS. PAKISTAN BROKERS 20 SHIPS THROUGH THE STRAIT.

Amid all the bad news, one positive development emerged this weekend.

Iran has agreed to allow 20 ships under Pakistani flag to pass through the Strait of Hormuz. Under the agreement, two ships will cross the strait daily.

Pakistan hosted a four-way meeting with Egypt, Saudi Arabia and Turkey on Sunday to discuss reopening the Strait. The meeting is part of an intensifying diplomatic effort to find an exit ramp.

While it is only twenty ships. Two per day. Against the pre-war flow of hundreds of vessels daily. But the principle matters. Iran allowing any ships through under any conditions is the first crack in the Strait closure since the war started. And the fact that Iran chose Pakistani-flagged ships reflects its trust in Pakistan as a neutral mediator.

Pete's Take 👇

This is the most significant diplomatic signal since the war began. Not the 15-point plan. Not Trump's Truth Social posts. Iran physically allowing ships through the Strait. Even if only 20 and only under Pakistani flag. This is moving in the direction of de-escalation. Watch whether this expands over the coming days to include other nationalities. If it does, it is the beginning of the end of the closure. And markets will price that aggressively.

📊 THE MARKET SETUP FOR MONDAY

Sunday futures: Dow futures down 0.53%, S&P 500 futures down 0.46%, Nasdaq futures down 0.48%.

Brent crude: up more than 50% since 28 Feb. Still around $108 to $113 heading into the week.

🎯 Pete's Investment Takeaway

All in all, I believe and hope that the end of this war is coming. The question is whether it comes in April or later.

Position. Don't predict

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Happy Hunting!

Pete
Invest with Pete

🚨‼️ By the way, I’ll never PM anyone on telegram or any other social media platforms. If you receive any “Pete” messaging you, these are scammers impersonating me. Pls beware!

The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.