Follow the Oil to Find the Next Conflict - Is Cuba After Iran?
Follow the Oil to Find the Next Conflict - Is Cuba After Iran?
TL;DR
- Every major war in modern history was decided by who controlled oil — Germany's aviation fuel collapsed from 180,000 tons/month to just 11,000 tons/month by 1945
- A clear pattern exists: Iraq oil → Libya oil → Iran oil → Venezuela oil → Cuba next? Cuba sits just 90 miles from Florida on a critical Caribbean shipping lane
- Caribbean tanker insurance costs are already spiking and capital is flowing out of Caribbean-exposed assets — the market is pricing in risk before the headlines
The History of Oil Deciding Wars
In my analysis of modern warfare through the lens of energy, one pattern is strikingly consistent: whoever controlled oil won, and whoever lost it was defeated.
World War II provides the most dramatic examples. Rommel's advance halted at El Alamein — not because of superior Allied tactics alone, but because he simply ran out of fuel. Germany's aviation fuel production cratered from 180,000 tons per month to a mere 11,000 tons by 1945 — a 94% collapse. Fighters and bombers sitting on runways without fuel are nothing more than expensive scrap metal.
Japan's case is even more direct. When the US cut off oil exports to Japan, it triggered the attack on Pearl Harbor and the subsequent invasion of Southeast Asia — all to secure fuel supplies. It's a textbook case of what happens when a resource-poor nation gets its energy lifeline severed: it makes desperate choices.
From 1973 to Now - Oil as a Geopolitical Weapon
Oil was first weaponized at scale in 1973 when OPEC decided to cut supplies by 5% per month. Prices surged from $$3 to $$5 per barrel — a 67% spike that seems modest by today's numbers but was absolutely devastating at the time.
The pattern has repeated consistently since then:
- 1979 Iranian Revolution: Oil supply shock triggered a global recession
- 1991 Gulf War: Oil prices spiked 140% — Saddam's invasion of Kuwait was fundamentally about controlling oil
- 2011 Libya: Production shutdown destabilized international crude markets
- Current Iran sanctions: Ongoing tension centered on the Strait of Hormuz
What I find most notable is the migration pattern of these conflicts: Iraq oil → Libya oil → Iran oil → Venezuela oil. Each flashpoint moves to the next vulnerable oil-producing state. And the logical next point in that chain could be Cuba.
The Strait of Hormuz - 20% of Global Oil in One Chokepoint
The most acute tension point right now is the Strait of Hormuz. 20% of the world's oil passes through this narrow waterway. Iran claims it's been blocked; the US says it hasn't. The truth probably lies somewhere in between, but the risk is undeniable.
Here's the indicator that tells me this is serious: Lloyd's of London cancelled war coverage for shipping through this area. Lloyd's is the world's most sophisticated risk market. When they refuse to underwrite something, it means the risk has crossed the threshold of what's commercially insurable. The US government has had to step in directly to provide shipping insurance — an extraordinary measure.
This isn't diplomatic posturing. Insurance markets are the coldest, most rational assessors of risk on the planet. Lloyd's pulling out means the probability-weighted cost of conflict has exceeded what any private market will bear.
Cuba - Why It Could Be the Next Flashpoint
When I look at Cuba, I see multiple risk factors converging simultaneously.
The energy crisis is already underway. Cuba relied on Venezuela for most of its oil. When the US restricted Venezuelan oil exports, Cuba's fuel supply was effectively strangled. The country is now experiencing routine blackouts and its economy is approaching collapse.
The geographic position is strategically critical. Cuba sits just 90 miles from Florida. More importantly, it sits directly on top of a key Caribbean shipping lane. Every tanker heading to the Gulf of Mexico passes near Cuban waters. This creates a chokepoint dynamic similar to the Strait of Hormuz.
Markets are already responding. Shipping route disruptions in the Caribbean are spiking. Insurance costs for Caribbean tankers are climbing. And capital is flowing out of Caribbean-exposed assets. The smart money is positioning before the crisis makes headlines.
The combination of an economically desperate country, sitting on a strategic chokepoint, 90 miles from the world's largest economy, with its primary energy supplier being squeezed — this is exactly the kind of convergence that has preceded every major oil-related conflict in modern history.
Investment Implications
- Energy sector positioning: With simultaneous risk at Hormuz and the Caribbean, the geopolitical premium on oil assets is likely to persist for the foreseeable future
- Shipping and insurance sectors: Surging war insurance premiums directly impact shipping company margins. Caribbean-exposed shipping firms face mounting cost pressure
- Supply chain diversification plays: Companies actively diversifying away from conflict-prone energy routes are better positioned for long-term resilience
- Gulf of Mexico refinery exposure: Any disruption to Caribbean shipping lanes could create supply bottlenecks for Gulf Coast refineries
- Safe haven allocation review: This is a reasonable time to reassess portfolio weighting toward dollars, gold, and other safe haven assets given escalating geopolitical risk
FAQ
Q: How likely is it that Cuba actually becomes the next conflict flashpoint? A: Nothing is certain, but the historical pattern (oil conflicts migrating to the next vulnerable producer) combined with current conditions (energy crisis, strategic location, proximity to the US) creates a convergence worth monitoring. From an investment perspective, even low-probability, high-impact scenarios deserve inclusion in risk frameworks.
Q: How much would oil prices spike if the Strait of Hormuz were actually blocked? A: Given that 20% of global oil transits the strait, a full blockade could drive prices up 50-100% or more in the short term. The 1991 Gulf War saw a 140% spike, and the Strait of Hormuz has an even larger impact on global supply than Kuwait did then.
Q: How should individual investors prepare for these kinds of geopolitical risks? A: Rather than making direct bets on oil ETFs or crude futures, the more practical approach is to audit your portfolio's geopolitical risk exposure. Reduce positions in companies heavily dependent on specific shipping routes, and increase allocation to firms with diversified energy supply chains. Think defense, not offense.
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