Everything You Need to Know About Oil

Summary

• Jonah (ex-Vitol) called the Iran-war oil spike a fade and was “very very wrong and very very right”: oil ripped to $120 before crashing 30% in a single day — in his telling the biggest one-day selloff in crude history. His expression discipline is the lesson: “I didn’t fade it with oil futures in my PA cuz I’m not loco” — the negative convexity of shorting oil into a war could wipe you out “trying to make 20% on my dollar,” so he bought beaten-down stocks and HyperLiquid instead, ate dirt, and came out in the money.
• The Strait of Hormuz — 30% of the world’s oil — can only close financially, not kinetically. Iran’s air defenses are gone (B-2s, then B-52s “just lighting up Iran”) and not a single boat was hit; the real closure was insurers refusing Hormuz voyages, making an Asian refiner pay “$88 bucks plus another 88 bucks of insurance. Economically impossible.” The US Treasury as insurer of last resort is “a light switch they could just turn on,” and the G7’s pledge of ~400M cumulative SPR barrels reopened traffic.
• The crash mechanics were gamma, not conspiracy: the market is very long gamma; physical trading houses are net-net flat gamma, while the trading houses that trade their gamma are long gamma through boats, tanks, and pipelines, and — as at Abqaiq 2019, when Vitol traders were already in since midnight after finding themselves “long 20 million barrels of oil up $15” — they hammered the spike back down with a click.
• Regime change in Iran doesn’t add new barrels to the market: Iran already exports max to China. The war is “re-engineering the pieces on the risk board game” — stripping China of ~50% discounts and secure supply from Iran and Venezuela before a Taiwan invasion “which will happen.” “Oil is victory. Oil is sovereignty.”
• Jonah’s fundamental call: four weeks ago oil was heading into a glut “basically as bad as COVID” — at $88 you’re only seeing geopolitical risk premium and “this thing is worth 50, right? If you can find a way to get short oil without getting your nuts blown off, you should do it.”
• Avi’s pivot: after a year pounding the table, “gold is a less good investment today than it was yesterday if the war succeeds” — the multipolar thesis weakens if post-Iran America is the strongest versus China since 2014-15. He’s “super f*ing bullish” US equities, with Iranian missile launches down 90% signaling a quick end to the war.
• The trade board: Intel to $80, REMX discussed since $65 and now at 98 with a 200 target, Tel Aviv Stock Exchange as “a quick 15% farm,” likely HYPE bought around 31 with Arthur Hayes’ 150 target (“I kind of agree”), plus uranium, Bitcoin (“very tied closely to the Trump regime”), and Ethereum. Avi also previewed Capital Flows’ bullish case for PERP, a Hyperliquid asset. Closing instruction: “Don’t be a panicking. Buy the f*ing dip.”

Deep dive

1. Fading a war without getting wiped out — expression beats thesis

• Jonah’s confession frames the episode: he tweeted variants of “this is a massive fade… Nothing ever happens,” got clowned by the internet when oil briefly printed $120, blocked another 50 people — and still ended up right. The discipline: “I faded this war. But I didn’t fade it with oil futures in my PA cuz I’m not loco… the negative convexity of that trade is so extreme that I could get financially wiped out trying to make 20% on my dollar.” He bought stocks and HyperLiquid when they were down instead — “I ate dirt while they went down further, and now I’m back in the money.”
• His warning to tweet-followers, verbatim: “If you are trading oil futures on the basis of my tweets, you are not going to make it… I’m not your dad. Do your own research.”
• The move itself was historic — up 25% and down 30% in the same day; “oil has never sold off 30% in a day before.” He’s honest about the surprise: “neither I nor obviously anybody else expected yesterday’s move. I’m humble about that. But the outcome is kind of what I expected.” His scar tissue: in COVID he was short all the way down until a Trump OPEC tweet sent oil up $11 in 10 minutes, leaving him and his partner “on the verge of tears.”
• Avi’s frame: this is now par for the course — silver did the same whipsaw six weeks ago — and he cites a stat that 80% of Gen Z believe speculative investments will drive their financial success over traditional investing. “While that might be an exaggerated statistic, the core is true”: assets moving out of lockstep is the opportunity set, and “the Citadels of the world aren’t capturing this.”

2. Hormuz can only close financially — and Washington holds the light switch

• The geography: 30% of the world’s oil transits the strait, 10-15 miles wide; Saudi Arabia’s East-West pipeline can bypass only 3-4M barrels/day. Iran could hit tankers with “a pea shooter… from Kharg Island” — yet not a single boat has been hit, and Jonah never expected one: “the only entity in this war that’s getting absolutely daddy’d and can do absolutely nothing about it is Iran.” After B-2s and then “World War II era B-52 bombers just lighting up Iran,” there’s no firepower left; the half-dead pinned wrestler isn’t getting up to take out boats.
• The real closure is insurance. Whether cargoes trade FOB or CIF, someone pays the insurance, and no risk-averse insurer will write a Hormuz voyage — so a refinery in Asia buying Iraqi crude pays “88 bucks plus another 88 bucks of insurance. Economically impossible.”
• Which is why Jonah stayed a fader: the US Treasury could become insurer of last resort — “a light switch they could just turn on” if they don’t want “a 1931 style apocalyptic unwind of a hundred years of progress.” And it resolved as scripted: the $120 print “squeezed Trump. It squeezed the G7” — high prices are the solution for high prices — the G7 pledged its ~400M barrels of cumulative SPR, traffic resumed, and oil collapsed.

3. Gamma, not manipulation, drove the 30% crash

• The physical market is very long gamma, but physical oil-trading houses are net-net flat gamma; the trading houses that trade their gamma are very long gamma through boats, pipelines, and tanks. Renting that infrastructure costs a premium but buys optionality, so they get longer as price rises. His best specimen is Abqaiq 2019 — after the strike spiked oil $10-15 overnight, Vitol’s physical traders had been in since midnight “selling, selling, selling… like, wait, I’m long 20 million barrels of oil up $15. I just made $30 by accident. Let me lock that in—or sorry, $200 by accident.”
• Monday was the same movie: “a bunch of guys came in… salivating thinking about all the villas in Ibiza… all they have to do is wake up at midnight and click. And that’s why I think the price just got hammered all the way back down.”
• Avi’s pointed question — do firms like Vitol or Glencore ever talk about pushing the market to squeeze trapped players? Jonah: “Of course” — but only in small markets. “Global crude oil is way too big for any company, even Vitol, to manipulate.” The games live in differentials — Singapore 380 versus New York Harbor fuel oil, EBOB — during pricing windows (4-4:30pm London), “physically huge markets but financially small” with maybe five financial participants, where cornering is possible.

4. Oil 101 with props: jet fuel is the prize, Iran’s crude is cheap to extract

• Jonah literally holds up some crude oil on stream. The chemistry lesson: oil is “a battery” — the denser the hydrocarbon bonds, the more valuable — and the more jet fuel a crude yields, the better, versus Venezuelan crude that’s “often a solid at room temperature” and yields fuel oil and asphalt.
• On the scaremongering question of whether Iranian oil is uniquely great: “No, but it’s a good oil” — light, sweet, low sulfur, up there with Arab Light — and in extraction cost per energy density probably the lowest in the world: “you just stick a toothpick in the earth there, and the light sweet comes out.”

5. Regime change adds zero barrels — this is a China trade

• Avi’s supply question — if the regime falls, doesn’t sanctioned Iranian oil flood the market? Jonah’s flat “No”: Iran is already exporting max to China. What changes is leverage — China currently gets ~50% discounts on Iranian and Venezuelan crude plus 100% security of supply; post-war those become open-market barrels China pays up for, and “when China invades Taiwan, which will happen,” Tehran and Caracas can’t threaten chaos on its behalf. “It’s basically about re-engineering the pieces on the risk board game.”
• The historical anchor, as told: when Rommel ran out of oil on his blitzkrieg through Africa, he lost. “Oil is victory. Oil is sovereignty. And if you don’t have it, you can’t do anything.”
• Jonah also takes on his liberal friends’ steelman (“what if we just left them alone?”): Iran’s regime runs on Twelver Shia eschatology — the 12th Imam returns only when everyone converts — and “you generally don’t want world domination maxis like Hitler or the Ayatollah Khomeini — may he rest in pieces — to have nuclear weapons.” His caveat for traders: “just because there’s a war in the Middle East does not mean oil is going to infinity.”

6. Avi’s gold rethink: the multipolar thesis just took a hit

• Avi’s geopolitical read: Trump will rank as “the most consequential president since maybe Roosevelt” — Reagan doesn’t count because the Soviet collapse was inevitable, while “the collapse of the Chinese network was not.” And the enabling condition was Israel dismantling Hamas, Hezbollah, and the proxies after October 7 — otherwise “Dubai would have been getting hit 15 times as hard.”
• The change of mind, stated as such: after being a gold bull “pounding the table for more than a year,” he now says “gold is a less good investment today than it was yesterday, if we succeed with this war, which I think we will.” The entire gold thesis was a multipolar world; if America post-Iran is “the strongest it’s been against China since like 2014, 2015,” he expects money to come flooding back into US equities and treasuries — “you want to be on the winning side” — while emerging markets will probably suffer as capital leaves.
• What survives the pivot: uranium, rare earths, and Bitcoin — which he ties explicitly to politics: “Bitcoin is very tied closely to the Trump regime… a swift resolution to this war is going to be very good for Bitcoin.” His timing evidence: Iranian missile launches are down 90%, so the war ends soon and “the next two months of price action are going to be really good.”

7. The trade board: $50 oil under the premium, generational entries on mega trends

• Jonah’s fundamental call, the sharpest of the episode: four weeks ago the oil market was heading into a supply glut “basically as bad as COVID.” The $88 screen price is pure geopolitical risk — “This thing is worth 50, right? So if you can find a way to get short oil without getting your nuts blown off, you should do it.”
• Avi’s thesis that wars and tariff snafus give “generational entries on mega trends”: Intel is going to $80 (“we’re going to be pumping out American chips”), REMX — discussed since $65, now 98 — is going to 200, “a no-brainer to me.” Avi says the Tel Aviv Stock Exchange, off 10-15%, should return to its highs; Jonah calls it “a quick 15% farm.”
• In crypto, Jonah discussed a likely HYPE dip — he got in around 31, and on Arthur Hayes’ note calling 150: “I kind of agree.” Avi separately previews Capital Flows’ bullish case for PERP, a Hyperliquid asset.
• Avi’s largest positions are Bitcoin, Intel, uranium, REMX, and Ethereum. The send-off: “Don’t get scared. Don’t be a panicking. Buy the f*ing dip.”

8. Coda: airbags, charity, and why taxes are your biggest expense

• The episode opens with Avi’s near-death T-bone in Puerto Rico — Bronco totaled, a broken pinky, time in slow motion and an unexplained metallic taste — and his takeaway: “the person that invented the airbag literally saved my life.” The obligation he draws: if you’re smart enough to make money in markets, “you’re probably intelligent enough to figure out how that money is best put to use” — traders who don’t give to charity, “I don’t know what you’re doing with your time.”
• It kicks off a genuine tax-haven disagreement. Avi’s case: “Your biggest expense every year is taxes” — move to Puerto Rico under 30, pre-family, and let three years of compounding set you up for life. Jonah’s pushback: most havens are miserable (Miami is “like living in a Grundle”; Monaco the lone exception), and havens aren’t the magic formula — his version was living in England to amass money tax-efficiently. Where they land: get the cushion young, however you can — “you can take all the risk you want in your 30s, 40s, and 50s and do incredible things with your life if you have a cushion.”