Sources have told Strategic Insight Group founder and CEO Dee Smith that Iran has been using its oldest missiles and drones in order to try to exhaust the US and Israel interceptors - and that they are “saving their most advanced weapons for the next phase.”
I caught up with Dee on Thursday (in a live session broadcast to monthly/annual Market House members). Dee has a vast intelligence network and decades of experience, and so when Dee flags something like this, we listen.
It is important to note that this information is from Dee’s confidential sources, not information we can verify. And as Dee himself makes clear there are no absolutes in the fog of war. However, Dee deems the reports credible and felt them important enough to share.
Iran has hypersonic guided missiles with what Dee’s sources describe as automatic launch capabilities in deep bunkers in the center of the country, Dee said. “Thus far, the US and Israeli assault has destroyed almost none of those sites, so we may well be entering a more serious phase [of the conflict].” This assessment differs from Pentagon claims of significant degradation to Iran’s launch capability, though the full picture remains unclear.
Dee thinks the US government knows about these weapons and has discounted them. But Dee is concerned that this discounting is unwarranted. While Iran could “pull back and bide their time” before ushering in this “phase 2,” Dee and his sources think it could well happen within the next week or so.
Add to that, Dee echoed what Ian Winer flagged with us in For the Record earlier this week - with drones costing c. $25k and the interceptor missiles costing millions, we are living in an era of asymmetric warfare. “Smaller, seemingly less powerful groups can seriously challenge and even overwhelm more powerful incumbent weaponry,” Dee said. “We are in an entirely different world in terms of how all of this works. The whole world is making up war as it goes along now, because these new weapons are just now actually being deployed and tested.”
THE 1979 REVOLUTION “ON STEROIDS”
Dee thinks the US was encouraged by its success in Venezuela, but warns that this is an entirely different kettle of fish.
Firstly, he said, this situation is extremely religiously charged, and the fact that Khomenei was assassinated during Ramadan carries a lot of significance for Shia Muslims. “That has contributed to some rally-around-the-flag effect within Iran,” De said.
Shia Islam is “very much about martyrdom,” Dee said, and the appointment of Khomenei’s son perhaps reflects that. “One of my sources described this as the original 1979 revolution on steroids,” he said. “And they are not at all disposed to backing down.”
And thirdly, “the idea that you were going to find some Iranians who you could work with the way [you could with] the vice president of Venezuela was probably untrue,” Dee said. “And the ones they had in mind were killed on the first day. This is spinning out of control in a way that is extremely dangerous.”
Dee said that the Gulf states have contacted Russia and China and asked them to intercede with Iran and find out what the Iranian demands would be for a ceasefire. “And the demands are not workable,” Dee said. “One example is for all US, French, and UK bases in the area to be removed. Another is a guarantee that the US would never attack Iran again. Who could get that guarantee?” These demands broadly align with Iran’s publicly stated ceasefire conditions, which include reparations and international guarantees against future aggression — though the specific base-removal demand has not been independently confirmed.
GULF EXISTENTIAL CRISIS
Dee pointed out that the whole business model of the Gulf states was that they were a safe and secure place, and so now they are “almost an existential crisis” as “that’s gone, and it’s gone for the foreseeable future.”
The attacks on desalination plants and civilian infrastructure (also flagged by Ian) could have very serious consequences, as in some places in the Gulf 70-90% of the water comes from desalinization. “If [the attacks] continue, you would essentially create a life or death situation for many millions of people,” Dee said. “And as well as making the war more intense, that would trigger a huge migration crisis.”
The relationship between the Gulf states and Iran is intransigent, Dee said, likening it to the wars of religion between Protestants and Catholics in Europe in the 15th-17th centuries.
COMPLACENT MARKETS
Dee spoke to a source this week who believes that we have entered a new range for oil prices - instead of $60-$80, it’ll be $80-$100, with spikes well north of that.
That puts a lot of countries in very difficult positions in short order, with the Philippines and Pakistan already asking public officials to work four-day weeks.
If the conflict goes on for a long time it is also extremely threatening to agriculture on a global basis, Dee said.
With all of that taken into account, are markets being complacent? Yes, Dee thinks, and he thinks it’s partly because “everybody was seduced by the ease of the operation in Venezuela.”
NOTHING GOES ON FOREVER
Dee’s sources think it is currently very unlikely that the Iranian regime will fall - chiefly because there is no organized opposition in the country. He said it’s easier to see it “dissolving into a civil war than it is to believe that the regime would be toppled anytime soon.”
With that in mind, if a ceasefire were to eventually happen, “the regime will keep rebuilding, they’ll retool, they’ll start uranium processing again, all these things,” Dee said. “And so we’re now in what many people will believe is a cycle where this war is going to have to be fought over and over and over.”
The good news(!) is that nothing goes on forever. “Maybe there’s some way this thing stops quickly,” Dee said. “But it’s very unlikely - given the parties, the intransigence, the threats - that this is going to come to any kind of a short conclusion.”
At the upcoming (March 31–April 2) summit between President Trump and President Xi Jinping of China, Dee thinks Xi will “try to convince Trump that he needs to declare victory in some way.” That victory could be ‘we’ve further degraded their nuclear capability’ or ‘we’ve degraded their ability to close the Strait of Hormuz.’ What Dee is hearing is that Trump “wants an off-ramp by summer” - though (perhaps unsurprisingly) this sits in tension with Trump's own public statement that he will accept nothing short of "unconditional surrender" from Iran.
But even if there is a declaration of victory, we then return to what Dee said earlier - if the Iranian regime isn’t toppled, they will rebuild and retool.
For investors, the fog of war cuts both ways. The bears point to $100+ oil, disrupted supply chains, and a conflict with no clear exit ramp. The bulls note that markets have absorbed the initial shock with more resilience than many feared, and that the Trump-Xi summit at the end of this month could provide the catalyst for a rapid de-escalation. The range of outcomes remains unusually wide: Is volatility itself the trade? Or as our friend Tony Greer put it: “This is no longer a casual bull-market grind; this is a battlefield.”
Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.
