Forecasting Under Fire

Updated from initial 40%/30% after March 13 Marine deployment. 5,000 US Marines deployed to Strait (USS Tripoli + MEU), crossing from air war to boots near ground. Oil $103.86 despite 500M barrel supply injection (IEA 400M + Russian sanctions lift 100M+). Escalation probability increased because kinetic presence escalates conflict dynamics.

Escalation split into sustained (40%) and spike-and-recovery (60%) sub-scenarios after Week 1 showed three spikes and three recoveries. Stalemate raised to 30% — the $100–110 range held all week. De-escalation cut to 10% after both sides publicly committed to hitting energy infrastructure on the same afternoon.

Band broke. Brent gapped to $115 after Houthis entered the war and Pentagon leaked ground invasion plans. Escalation at 55% (highest yet) reflects nuclear facility strikes on both sides, 82nd Airborne deploying, and Bab el-Mandeb explicitly threatened. Stalemate dropped from 30% to 18% as the $100-110 range that held for two weeks is dead. France confirmed 30-40% Gulf refining capacity destroyed with 3-year recovery. Physical oil at $126 vs paper at $115.

Escalation dropped 8pp from 55% to 47% despite Trump's most aggressive rhetoric yet (48-hour Hormuz ultimatum, Easter Sunday "Power Plant Day" Truth Social post). The model overcalled Week 3 by $9.83 at 55% escalation. Physical Brent at $141 but futures at $109, biggest spread of the war. Hormuz transit at 6 vessels/day vs 135 normal but highest since war started. F-15E shot down over Iran. Iran hit Kuwait refinery and launched biggest missile salvo in 3 weeks. Stalemate up 5pp to 23% because 5+ weeks of grinding war with no decisive breakthrough is becoming the structural baseline. Demand destruction up 3pp to 15% as sustained $109+ pricing changes purchasing behaviour. Black swan holds at 8% with cyber dimension (IRGC declared US ICT/AI companies legitimate targets Apr 1, axios npm supply chain attack same day, 100M weekly downloads).

Hedged position between two framings. The Hormuz blockade is real (CENTCOM order, 7% market move, ships turning around) but the model has overcalled escalation for four consecutive weeks. Escalation at 35% (down 12pp from Week 4) respects both the blockade and the Pause thesis: the model reads the script, the market reads the actor. Every Trump deadline has produced a climbdown. But the market moved 7% on this one, saying it distinguishes between Truth Social posts and operational orders. Stalemate at 25% (up 2pp) because a blockade can become the new grinding normal, neither side able to force resolution. De-escalation at 12% (up 5pp from Week 4) because the diplomatic channel exists even though Islamabad talks failed after 21 hours. Goldman base case $90 Q2. Demand destruction at 18% (up 3pp) is structural after 7 weeks of elevated prices. Black swan at 10% (up 2pp) because US-IRGC naval confrontation at a chokepoint is a genuine shooting-war tail risk. Ceasefire technically holds on bilateral front but framework is dead per NOVA assessment.