Mastery of energy, again
Winston Churchill, as first lord of the Admiralty,
tied Britain’s fate to Persian oil. United States
President Donald Trump’s war in Iran, centred
on Operation Epic Fury, could do the same for
the West by removing Iran’s nuclear shadow,
resetting oil toward US$60, and finally unlocking
a modern peace dividend.
“Mastery itself was the prize of the venture.” Winston
Churchill’s 1912–13 case for converting the Royal Navy
from coal to oil—enshrined in historian Daniel Yergin’s
The Prize: The Epic Quest for Oil, Money, and Power—captured
the brutal clarity of a great power energy strategy: accept
dependence to command the seas. That wager framed
the last century. In 2026, as Epic Fury grinds through the
Gulf and Brent trades above US$100, the question is no
longer whether oil confers mastery, but who holds it: a
revolutionary theocracy astride the Strait of Hormuz, or
a West intent on stripping the terror and nuclear risk now
priced into every barrel out of the energy system—finally
collecting a long‑deferred peace dividend.
“Mastery itself was the prize of the venture.”- Daniel Yergin, on Winston Churchill’s 1913 argument
Churchill’s shift bound Britain’s prosperity to distant wells
and narrow waterways, welding energy supply to national
survival. He understood that control of energy was not
an adjunct to power, it was the metric. In April 2026, with
Hormuz contested and Iranian missiles demonstrating
reach beyond the Middle East, the same dilemma
confronts policymakers and markets. Does the West still
want that prize, and what is it prepared to stake to reclaim
it from a regime that has spent half a century turning oil,
terror, and nuclear brinkmanship into interchangeable
tools of coercion? Assume Trump’s campaign does what it
is now on course to do: not merely reopen a chokepoint,
but neutralize a nascent tactical nuclear threat which, left
intact, would hardwire a doomsday premium into global
energy prices for a generation.
Iran’s war with the West has done what decades of
shocks, embargoes, and “maximum pressure” could not:
it has made the hidden tax on energy legible even on a
Bloomberg screen. Strip out the terror and nuclear‑risk
premiums in a post‑Trump‑Iran settlement, and Brent
does not belong north of US$100; it sits much closer to
the US$60 level implied by underlying supply and demand
and pre‑war bank research. The gap between where oil
trades in a world held hostage by a nuclear‑ambitious
theocracy at Hormuz and where it would trade if
flows were secure and de‑weaponized is more than a
volatility surface. It is the unclaimed peace dividend of
globalization, the energy market analogue of the windfall
that followed the end of the Cold War, when the removal
of an existential nuclear standoff released capital,
confidence, and capacity back into the real economy.
The choice now facing the West is whether to lock in
that outcome. Ending the Cold War removed the Sword
of Damocles that had hung over every investment
decision for half a century; a successful conclusion to
Iran’s nuclear extortion would do something similar for
the 21st‑century economy, collapsing a structural risk
premium that has quietly taxed households, corporates,
and sovereigns alike. The question, as Churchill would
have recognized, is whether the West is prepared not
just to win on the battlefield but to consolidate that
victory into a new era of energy mastery, and to treat
the potential verified removal of Iran’s enriched stockpile
and fuel‑cycle capabilities as a security gain on the scale
of the 1987 Intermediate‑Range Nuclear Forces Treaty or
the dissolution of the Soviet arsenal.
For Europe, the stakes are not abstract. Iranian missiles
and drones have already shown that European Union
territory and NATO logistics hubs sit uncomfortably
close to the new strike envelope, shattering the illusion.
that Gulf risk could be quarantined to energy prices
alone. The deeper reckoning is with Europe’s own energy
strategy. The choice by many Western governments
to anchor industrial policy primarily on climate
targets—while neglecting cheap and secure supply—is
now coming home to roost. Prosperity in an artificial
intelligence (AI)‑driven economy rests on abundant,
reliable energy rather than on cheap consumer imports,
echoing Churchill’s insight that mastery of energy is
mastery of power. That logic points north as well as east:
Canada—with its hydrocarbons, hydropower, and critical
minerals—looks less like a peripheral supplier and more
like a potential resource superpower if it can cut through
regulatory thickets and build the infrastructure to deliver
secure barrels, electrons, and metals to allied markets.
U.S. hard power, the security backstop European,
Canadian, and the United Kingdom economies long
treated as a law of nature, now looks more contingent,
more politically conditional, and more thinly spread
across theatres. One could easily imagine Washington
reverting to a post‑First World War stance, turning inward
to rebuild its real economy, and no longer willing or able
to offer security as a global public good. A successful
Trump‑led settlement that removes both the nuclear
overhang and the Hormuz chokepoint as instruments of
coercion would not only stabilize Atlantic world energy
supply but also underwrite a more credible NATO
deterrent at lower long‑run cost—replacing the ersatz
“peace dividend” of underfunded defence with a genuine
one built on reduced threat rather than wishful budgeting.
For investors, a decisive outcome in Iran would not
just redraw maps in the Gulf; it would refashion term
premia. As the nuclear and terror discounts bleed out
of the curve, gilt yields and U.S. Treasuries alike would
begin to reflect lower expected inflation and slimmer
risk premia rather than recurring energy shocks. Credit
spreads—particularly for energy‑intensive sectors
and fragile sovereigns—would compress as balance
of payments and default risks ease. Equity markets
would reprice in turn: structurally lower input costs
and a thinner geopolitical risk layer would lift margins
in manufacturing, transport, and consumer names,
even as oil majors and defence stocks surrender some
of their crisis rent. For the Square Mile and Wall Street,
the real prize is not another trade on US$120 Brent; it is
the re‑rating that comes when a structural doomsday
premium is finally taken out of the system and the peace
dividend—deferred since the end of the Cold War and
repeatedly eroded by Iran—at last starts to be paid in
cash flows rather than communiqués.
Churchill’s ghost at Hormuz
On the first day of April 2026, as Brent traded just
above US$100, the world was relearning what Churchill
meant when he called mastery the prize. As first lord
of the Admiralty, he forced the Royal Navy off domestic
coal and onto Persian oil, then secured that lifeblood
by buying control of Anglo‑Persian Oil. He knew the
bargain: oil conferred speed and reach, but at the price
of dependence on distant fields and fragile sea lanes.
Hence his warning to Parliament in 1913 that “on no one
quality, on no one process, on no one country, on no
one route, and on no one field must we be dependent”
and his insistence that safety and certainty in oil lay
“in variety, and in variety alone.”
That decision created the modern energy system and
placed Iran at its centre. Four decades later, as prime
minister, Churchill confronted the second act of his
own gamble when Iran’s prime minister Mohammad
Mossadegh nationalized Anglo‑Iranian Oil Company’s
assets. The 1953 coup that restored the Shah was less a
morality play than a confirmation that control over Iranian
oil would be contested by empires, nationalists, and,
eventually, revolutionaries. Churchill’s instinct to secure
supply at the source and to dominate the sea lanes that
connected it to Britain established a strategic architecture
with a simple premise: mastery of energy flows was
indistinguishable from mastery of global power.
The twist came in 1979, when that architecture was
seized by those it had previously constrained. The
Iranian Revolution toppled the Shah and installed
Ayatollah Khomeini’s theocracy—a regime that viewed
the U.S. as the “Great Satan,” embraced terrorism as
statecraft, and sat astride the Strait of Hormuz. Oil
workers struck, production collapsed, and prices more
than doubled. The world discovered that the geographic
fulcrum Churchill had chosen could just as easily be
pulled by a revolutionary fist. From that moment,
the markets began to price an Iran terror premium.
It was distinct from OPEC’s cartel pricing power or
conventional war risk. It recognized that a state sponsor
of terrorism—with a web of proxies and control over
the narrow channel through which roughly a fifth of
seaborne oil must pass—would periodically weaponize
that position. Each tanker attack in the 1980s “Tanker
War,” each Hezbollah bombing, each missile launched at
a Gulf facility added a sliver to that premium. Over time,
slivers hardened into a slab.
Churchill’s maxim was inverted. Variety still existed
geologically, with new barrels from the North Sea,
Alaska, and deepwater, but strategically the system
was again anchored on a single actor most willing to
turn energy into a cudgel. Where Churchill had sought
safety through variety, the world lived with uncertainty
concentrated in one revolutionary capital. And where
he had seen mastery as the prize of bold, deliberate
ventures, mastery of energy risk quietly migrated to a
regime that treated terror as an operating model.
How terror became a line item
The terror premium is no longer an academic calculation;
it is a visible spread. In calmer phases of the cycle,
geopolitical risk barely nudges price forecasts. In crisis, as
in early 2026, the gap between pre‑war expectations for
oil and the levels seen when Hormuz is threatened yawns
wider, and futures curves kink as traders try to price the
possibility of disruption. Even if part of that is fear and
temporality, the underlying message is obvious. There is
a structural surcharge on every barrel to account for the
probability that Tehran or one of its proxies will, at some
point, take terrorist action.
That surcharge has a history. The 1973–74 oil embargo
revealed how quickly geopolitics could quadruple prices,
but Iran was then still an ally. The true discontinuity came
with the 1979 revolution and the Iran‑Iraq War. The Tanker
War saw mines in the Gulf, neutral shipping attacked, and
U.S. naval forces drawn in to reflag and escort tankers.
Washington’s 1984 decision to designate Iran a state
sponsor of terrorism, off the back of Hezbollah’s bombing
of U.S. Marines in Beirut, made explicit what markets had
intuited: one of the central suppliers to the system was
also its most committed saboteur.
In the decades since, each escalation has ratcheted the
premium higher. Iran’s nuclear program, its investment
in Hezbollah, Hamas, Iraqi militias, and the Houthis, its
attacks on Saudi infrastructure in 2019, its role in Hamas’s
Oct. 7, 2023 massacre, and its sponsorship of Houthi
strikes on Red Sea shipping have all translated into higher
base prices and fatter risk tails. Each diplomatic attempt
to park the problem—most notably the 2015 nuclear
deal—shaved a little off temporarily but never eliminated
the underlying risk. The slope of the long‑run price path
steepened even when nominal prices fell.
The February 2026 war crystallized what had previously
been an accounting identity. The U.S. and Israeli strikes
on Iran’s nuclear and military infrastructure triggered
Tehran’s maximalist response: mines laid in Hormuz,
anti‑ship missiles fired, and swarming attacks on
tankers. Overnight, a theoretical discount factor became
a literal blockade. Brent jumped, futures curves bent out
of shape, and importers from Asia to Europe scrambled
for alternative supplies. The terror premium stepped out
of the footnotes and onto the front page.
What is at stake in the Trump administration’s Iran
campaign, with Epic Fury at its core, is therefore not
simply the fate of one regime or one waterway. It is
whether this premium remains a permanent feature
of the global economy, an invisible tax set in Tehran,
or is finally stripped out by a deliberate act of policy.
In Churchill’s terms, it is whether mastery over energy
risk belongs to those who built the system or to those
who have learned to hijack it.
Trump, Hormuz, and the end of the free ride
For half a century, the controlling Western thesis on
Gulf security has been simple. The U.S. guarantees open
sea lanes in and around Hormuz, and everyone else
structures their politics and budgets around that free
insurance. Europe and the UK run down their militaries,
build their energy systems on Russian gas and Gulf crude,
and talk loftily about multilateral virtue. Asian powers,
above all China, binge on imported hydrocarbons,
including discounted barrels from sanctioned regimes.
All assume that American carrier groups will materialize
off the chokepoints when required.
Trump’s antithesis is to withhold the automatic
guarantee at the moment of maximum stress. The U.S.
can break Iran’s remaining ability to contest Hormuz;
that is not in doubt. The point is not that America lacks
the power; it is that, for the first time in decades, it is
openly questioning whether it should deploy that power
unconditionally. By allowing a closure or partial closure
to bite, Trump ensures that the immediate pain is felt
most acutely in exactly those jurisdictions—Europe and
China—that have benefited most from cheap energy
and U.S.‑policed routes while contributing least to the
underlying security. His reported blunt message to European and British
leaders—you need the oil out of the Strait more than
we do, why not go and take it—is not a gaffe. It is the
spoken form of a strategic pivot. It reverses the default
assumption that U.S. hard power is an inexhaustible
global public good to be drawn on by allies, adversaries,
and free riders alike. It forces allies to confront a
contradiction they have long ignored: their ability to
denounce American “unilateralism” and underfund their
own defences rests entirely on a U.S. security umbrella
they neither fully finance nor politically respect.
In Hegelian terms, the refusal to solve Hormuz on
cue is the necessary negative moment before a more
honest order can emerge. A rapid, surgical clean‑up
would restore the status quo ante: Europe resumes
underinvesting in defence, China continues to arbitrage
discounted crude from rogue regimes, and the terror
premium remains a permanent feature of the price strip.
By delaying, by insisting that those who need the barrels
most step up, Trump is forcing responsibilities and
exposures into the open.
The strategic prize is not merely the reopening of a
chokepoint. It is a reordered system in which the U.S.
—no longer the unpaid global policeman—becomes
the central arbitrageur of hydrocarbons. U.S.‑aligned
production in the Americas, combined with a
discretionary capability to secure or decline to secure
Hormuz and the Bab el‑Mandeb, places Washington
at the heart of the hydrocarbon chessboard. That is
Churchill’s logic, updated: mastery of the flows, not
merely participation in them.
From Berlin to Epic Fury: two peace dividends
The template for how such a transition can work is
found not in energy markets but in a concrete slab
of history: the fall of the Berlin Wall. When the Wall
came down and the Soviet Union dissolved, markets
did something brutally rational. They stripped out the
“nuclear Armageddon premium” embedded in every
yield curve, every defence multiple, every corporate
investment decision. The first peace dividend of 1989–91
was not gauzy sentiment in Berlin squares; it was
finance ministers and chief financial officers reallocating
capital from tanks and missile silos to fibre‑optic cables,
container ports, and early internet infrastructure.
The end of the Cold War did not abolish risk. Local
wars continued, terrorism persisted, financial crises
erupted. But the one structural threat that had framed
every strategic choice since 1945—the possibility that
a superpower miscalculation could end civilization
in half an hour—was removed. Defence budgets fell
as a share of GDP, the U.S. briefly flirted with fiscal
balance, and Europe ploughed its savings into welfare
states and integration. Globalization took off, buoyed
by the combination of U.S.‑guaranteed security and
capital released from the hard requirements of nuclear
competition.
Trump’s Iran strategy is that logic applied to the world’s
energy arteries. The stated aim is not to manage Iran’s
behaviour at the margin, but to destroy the regime’s
capacity to hold Hormuz and the Bab el‑Mandeb
hostage—to decapitate the terror command, pulverize
layered naval and missile defences, and shred the
logistics that knit together Tehran and its proxies. Done
properly, it is not a punitive raid; it is a structural change.
Success in this campaign would be—for oil and for
nuclear risk in the Middle East—what the fall of the
Wall was for superpower confrontation. Whereas
1989–91 allowed markets to stop discounting an
annual probability of superpower annihilation, a
genuinely de‑weaponized Hormuz—and an Iran that has
surrendered enrichment and seen its buried stockpiles
removed—would finally allow traders and central banks
to stop discounting a chronic probability of terror‑driven
supply shock and nuclear breakout. Just as the first
peace dividend financed the first internet age and a
decade of globalization, this second, energy‑centred
peace dividend could finance an AI‑driven productivity
boom and the repair of Western balance sheets.
The exact numbers will always be contestable.
Forecasts for Brent before the war in 2026 clustered
around levels that implied a much calmer geopolitical
backdrop. Today’s prices—inflated by mines in Hormuz
and missile salvos across the Gulf—sit far higher. Bring
supply security back closer to that earlier world, with
more routes, more non‑OPEC barrels, and fewer armed
actors using sea lanes as leverage, and the path back
toward a US$60‑type equilibrium is not utopian. It is the
logical outcome of removing a chronic fear factor from
every barrel. The first peace dividend took the nuclear
threat off the table. The second would take the Iranian
Revolutionary Guard Corp’s finger off the energy trigger
and its hand off the centrifuge switch.
China’s lost arbitrage, Europe’s reckoning
Not every major power benefits from this shift. For
two decades, China has quietly exploited the gap
between Western scruples and Western guarantees.
It has built a growth model that leans heavily on
imported hydrocarbons, often sourced at discount
from sanctioned or unstable producers such as Iran,
Venezuela, and Russia, and shipped through chokepoints
policed by a navy it did not pay for. It enjoyed a double
arbitrage: cheap barrels from rogue regimes and free
security from the very order it denounced as hegemonic.
An Iran outcome that genuinely breaks Tehran’s capacity
to weaponize Hormuz and a political transition that
removes Venezuela from the ranks of criminalized
petro‑states would shrink that arbitrage dramatically.
Discounted barrels from rogue regimes become scarcer
and more conditional. Access to secure sea lanes
becomes more explicitly linked to political behaviour.
Beijing still has options, from domestic coal to growing
renewables and a formidable industrial base, but the era
of quietly pocketing a terror‑premium‑fattened discount
while someone else patrols the sea lanes is over.
Europe faces a different reckoning. It built its post‑Cold
War model on three assumptions: cheap Russian gas,
cheap Gulf crude, and a permanent American security
umbrella. All three have been shattered or strained.
The invasion of Ukraine forced a painful divorce from
Gazprom. The Hormuz crisis exposes the vulnerability
of European industry to disruptions in seaborne oil and
liquified natural gas (LNG). Trump’s pointed suggestion
that Europe should go and take the oil it needs confronts
a political class that has confused soft power and climate
virtue with strategy.
This could be Europe’s Churchillian moment—a belated
recognition that mastery, or even basic security, is never
free. That would mean serious rearmament, investment
in naval and air capabilities, and hard choices on
domestic energy production and infrastructure.
Or Europe can continue to moralize, hoping that
Washington quietly resumes its role as global policeman
while Europe itself resolves to be even more righteous.
In that case, it will discover that the distribution of any
energy peace dividend is not symmetrical. Those who
pay for mastery tend to keep a larger share of the prize.
The myth of decline, reversed
The myth of American decline has always been a story
told by people who mistake a change in role for a loss
of power. The United States is not a spent force. It still
commands roughly half of the world’s usable military
power, hosts the core of the global innovation system,
and sits atop an unmatched resource base. What has
changed is that it can no longer afford to be the world’s
security contractor, subsidizing allies and adversaries
alike, while also underwriting an ever‑expanding
domestic state and pretending its debt is costless.
The path now opening through Hormuz and Tehran
is the path back to alignment between commitments
and capabilities. Resolve the Iran crisis on terms that
secure the free flow of oil, consolidate political change in
Caracas, strip out the terror premium, constrain China’s
access to cheap, weaponized variety, and stabilize a more
moderate Iran within a peaceful regional order—and
2026 will not join 1973 and 1979 as another grim entry in
the chronicle of oil shocks. It will be remembered as the
year the world finally honoured Churchill’s insight that
safety and certainty in oil lie in variety, and reclaimed the
mastery he knew was the real prize of the venture.
The fall of the Berlin Wall closed the book on the nuclear
superpower confrontation and released a peace dividend
that financed globalization and the first internet age.
Success in Trump’s Iran gamble can close the book on
the terror‑driven energy and nuclear order that began
in 1979 and release a second dividend: a US$60‑oil world
that finances an AI‑driven productivity boom and a
rebuilding of Western power on safer foundations.
The question is no longer whether that dividend exists
or whether mastery over energy and nuclear risk in the
Gulf is up for grabs. It is whether, this time, the West has
the will to take the prize.
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