Nobel laureate Paul Krugman laid out the NACHO trade—short for “Not A Chance Hormuz Opens”—last week, arguing the Strait of Hormuz will stay shut and the US is heading for “the greatest strategic defeat in American history.”

Events since have only proven his thesis.

President Donald Trump rejected Tehran’s latest counter-proposal as “TOTALLY UNACCEPTABLE” on Sunday night, sending Brent crude up 3.5% to $104.80 this morning.

Robert Kagan, a prominent neoconservative, made the same case over the weekend, calling a US defeat “not only possible but likely.” He wrote that Iran can now “demand tolls for passage” and “limit transit to those nations with which it has good relations,” a position that could push oil to $150 or $200 a barrel.

The pump-price proof is already showing. AAA’s national diesel average sat at $5.67 a gallon last week, up from $3.49 a year ago. California regular unleaded broke $6.15 over the weekend.

The pressure is global. Indian Prime Minister Narendra Modi on Sunday urged citizens to bring back COVID-era work-from-home, carpool, and skip overseas vacations to conserve fuel. Bangladesh introduced rationing. Sri Lanka cut working days.

What Polymarket Is Saying

Polymarket traders give the Strait of Hormuz a 13% chance of returning to normal by the end of the month, and a 38% by the end of June.

A separate market on Trump lifting the US counter-blockade prices May 31 at 26%, and June 30 at 56%.

Even with Kevin Warsh, Trump’s nominee set to become Fed Chair soon, the Polymarket contract on the number of Fed rate cuts this year has zero as the favorite at 58%.

The closest proxy Polymarket has for hostilities resuming is its ‘Iran closes its airspace by?’ market, where traders give May 31 a 33% chance.

Tickers Tied To The Squeeze

NACHO splits cleanly into two trades. US refiners benefit because their crude input is partly insulated by domestic and Canadian supply while refined products price up globally, with Valero Energy Corp (NYSE:VLO), Marathon Petroleum Corp (NYSE:MPC) and Phillips 66 (NYSE:PSX) the most direct vehicles.

Trucking sits on the other side. Diesel is one of the largest variable costs for J.B. Hunt Transport Services Inc (NASDAQ:JBHT) and Old Dominion Freight Line Inc (NASDAQ:ODFL), and contract-rate fuel surcharges lag spot diesel by weeks.

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