Iran Breaks the Bond Market.

The Hook

• On 16 September, the day the Federal Reserve raised interest rates, Iran's parliamentary speaker posted a modified version of the Taylor rule — the formula American central bankers use to set interest rates.
• He added two new terms, each named after a waterway Iran and its allies can disrupt: SOH (Strait of Hormuz) and BM (Bab-el-Mandeb), the narrow strait at the southern end of the Red Sea.
• He mockingly called it the "Straits Taylor rule" and wrote beneath it: "You can't 25 basis points a choke point" — i.e. a quarter-point rate hike cannot reopen a strait or pump a single extra barrel of oil.
• His core claim: part of today's oil price is fear (the Strait of Hormuz risk premium), and "we set that premium."
• A week after the post, diesel hit $6.53 per gallon — the highest price ever recorded in the US.

The Formula Being Mocked

• The Taylor rule (devised in 1993 by Stanford economist John Taylor) asks two questions: are prices rising faster than the central bank wants, and is the economy running hotter than normal? If either is "yes," raise rates; if "no," lower them.
• The speaker kept that logic but added the two strait terms — so in his version, the more those waterways are disrupted, the higher US interest rates must go.
• The video's central link: if the Fed raises rates every time oil spikes, then whoever controls oil prices controls the Fed, because higher oil prices mean higher prices for everything.

The Build-Up Before the Fed's Decision

In the ten days before the 16 September rate decision:

• Tankers were attacked in and around the Strait of Hormuz.
• A Saudi refinery in Jizan was hit on 10–11 September.
• Iran-backed Houthi militias seized the coast along Bab-el-Mandeb.
• Drones launched from Iraq forced Saudi Arabia to shut its main oil pipeline.
• Oil climbed back above $100 per barrel; another tanker was attacked on 15 September near the strait's entrance.
• The same pattern preceded the Fed's July meeting (Houthi missiles struck two Saudi tankers; oil touched $100).

The Four-Step Chain (Iran's Alleged Plan)

Step 1 — Oil becomes diesel. Iran sits on the north shore of the Persian Gulf; the only way out to the world is through Hormuz. After the US and Israel struck Iran on 28 February, Iran declared the strait closed. In March, Brent crude rose more than 60% — the biggest one-month jump since at least 1988. In September, Houthis seized the island in the middle of Bab-el-Mandeb. Together, the two straits guard the Gulf's way out and its main way around; a Saudi pipeline crossing the desert to the Red Sea is the biggest detour, but tankers still must pass Bab-el-Mandeb. Whoever controls both can block the front and back doors at once.

• Diesel powers ~73% of US freight.
• Diesel rose from about $3.76/gal before the war to $6.53/gal by the week of 21 September — ~74%.
• Farmers feel it first; a Missouri farmer told Fortune he was paying twice as much for diesel as the year before.
• The Middle East ships nearly a quarter of the world's urea (a nitrogen fertiliser derived from the same oil); urea prices jumped 80% between February and April, per the World Bank.
• Jet fuel roughly doubled; by August, airfares were 23% higher year-on-year.

Step 2 — Higher diesel becomes a rate hike. The August inflation report: prices overall 3.4% higher year-on-year; energy 16% higher. The Taylor rule said raise rates, and on 16 September the Fed did — its first hike since 2023. The trap: a rate hike works by making people borrow and spend less, but Americans aren't paying more because lending is too cheap — they're paying more because oil can't leave the Gulf.

Step 3 — The hike lands on families. On 26 February, two days before the war, the average 30-year mortgage was 5.98% (first time below 6% in 3½ years). By 24 September it was back over 7% at 7.03%.

The same applies to car loans, business loans and credit cards.

Step 4 — The hike hits the government. The biggest borrower is the US government, via Treasury bonds. On 21 September, total US debt was about $40.1 trillion, and every rate hike makes refinancing it more expensive.

• In the first 11 months of the fiscal year, the US spent over $1.05 trillion on interest, versus $833 billion on its military.
• The video cites historian Niall Ferguson's "law": any great power that spends more on debt than on defence risks ceasing to be a great power — pointing to Spain (1500s), France (1780s), the Ottoman Empire (1870s) and Britain (between the world wars). By his count, America crossed that line in 2024.

The spiral: Iran makes oil harder to ship → oil becomes diesel → diesel becomes inflation → inflation pushes the Fed to hike → higher rates make the debt costlier → the government must borrow more → nervous lenders demand even higher rates.

How it ends (Iran's bet): the Fed either keeps raising until something breaks (housing, stocks, or the bond market itself), or stops raising and eventually prints money to buy its own bonds — protecting the bond market but devaluing the dollar and pushing prices up further.

America's Counter-Strategy: Energy Dominance

• In February 2025, President Trump created a National Energy Dominance Council, putting the Interior and Energy secretaries in charge of maximising US oil, gas and power production, and using energy as a commercial and diplomatic lever.
• In December 2024, Trump told the EU to close its trade gap by large-scale purchases of US oil and gas, or face tariffs.
• In 2025, the US produced a record 13.6 million barrels of crude per day — more than Russia and Saudi Arabia combined — and is the world's biggest LNG exporter.

Rivals' energy production knocked offline in 2026:

• 18 March: Israel struck Iran's South Pars gas field; Iran fired missiles at Ras Laffan in Qatar, one of the largest gas export sites on Earth, knocking out about 17% of Qatar's export capacity (repairs to take years).
• September: drones from Iraq hit Saudi Arabia's East–West pipeline, the main route avoiding Hormuz; Saudi Arabia shut it down.
• Russia: Ukrainian drones hit a refinery about once every three days in the first eight months of 2026; by June, Russian refineries ran about 30% below the prior year.
• Iran: US Energy Secretary Chris Wright said the US military's biggest regional job is to stop the export of Iranian crude.

Who fills the gap — America:

• April 2026: US crude exports hit a record 5.6 million bpd, 21% above the old record; first-half gas exports rose 23%, with exports to Asia more than doubling.
• Europe is expected to get about two-thirds of its imported gas from America this year.
• Qatar — formerly one of the biggest gas exporters — has begun buying US gas to honour its own contracts; state company QatarEnergy had bought more than 33 shiploads of American gas by end-July, sent on to South Korea, Taiwan, Japan, India and Bangladesh.
• The EU has promised to buy $750 billion of American energy by 2028.
• Venezuela: on 3 January US special forces captured President Nicolás Maduro and flew him to New York to face drug-trafficking charges. Venezuela holds the largest oil reserves on Earth (~300 billion barrels, per OPEC). On 1 September 2026, the US signed a deal with Venezuela's interim government giving American-led companies 100-year rights to 17 oil fields. Wright's stated mission: grow supply "in Alaska, in the Gulf, in Venezuela, anywhere we can."

The theory in one sentence: America doesn't need to win a bond war if it can make the world dependent on American energy priced in American dollars.

Plausible deniability: America did not fire most of the missiles — Iran hit Qatar, Ukraine hit Russia, Iraqi militias hit Saudi Arabia. But the video argues America may be starting the fights: the war with Iran began 28 February; Israel's 18 March South Pars strike led Iran to hit Qatar (Axios later reported, citing US and Israeli officials, that the White House had approved it, despite Trump publicly denying knowledge); and US intelligence has reportedly helped Ukraine plan strikes on Russian energy since 2025. In March, America bombed military targets on Kharg Island (where ~90% of Iran's oil is loaded) but deliberately left the oil terminal standing.

The Collision

• Iran's attacks make oil expensive → expensive oil drives customers away from the Gulf and toward America. Every threatened tanker helps US energy dominance.
• But every supplier taken offline keeps prices high → high prices keep inflation high → inflation pushes the Fed to hike → higher rates make US debt costlier. So every barrel America sells at high prices helps Iran's war on the bond market.
• Iran needs oil expensive for as long as possible (each month of high prices is another month of high rates on $40 trillion of debt). America only needs it expensive briefly — long enough for rivals to be knocked offline and for the world to sign long-term contracts with Texas, Alaska and American-controlled Venezuelan producers. After that, cheaper oil would pull inflation down, let the Fed cut rates and shrink the interest bill.
• This matches what Treasury Secretary Scott Bessent described on 8 August: over the next two years, the Strait of Hormuz would become "just another body of water" — and if energy flows around the strait instead of through it, the fear premium disappears and Iran loses the price it claims to set.

The Race of Two Clocks

• America's clock is measured in energy contracts — how fast it can scoop up the world's energy customers.
• Iran's clock is measured in Fed meetings — the interest bill grew 12% in the first 11 months of the fiscal year.

What to Watch

• The Fed's next rate decision is due 28 October.
• Watch the Persian Gulf and the Red Sea in the weeks beforehand. If a tanker is hit or a pipeline goes quiet and oil climbs as the Fed prepares to vote, the video argues the "Ghalibaf formula" is still working.
• The open question: can America erase Iran's two terms from that formula before those two terms break America's bond market?