The markets are red across the board again with everything selling off at once—the crash dynamics I warned about as signaling something far bigger was coming. While the mainstream narrative sold people on a quick, two-week conflict, then back to business as usual—we can now see the reality is setting in: we’re looking at consequences that will stretch for years. Covid 2.0.
The West is already revealing their scripted response: energy lockdowns and rationing. This was always their goal, but they needed their crisis—and now they have it. This morning we woke up to the news that Qatar’s massive Ras Laffan LNG complex—the world’s largest—was hit multiple times by missiles overnight. The damage is reportedly substantial, with Qatar suggesting it could take up to five years to repair and wipe out at least 20% of Qatar’s output. The FT reports this as the ‘Armageddon scenario for gas markets’. Prices have no doubled since the start of the ‘conflict’.
LNG terminals are some of the biggest and most complex constructions in human history, and Ras Laffan is the largest of them all, turning Qatar’s huge gas reserves into a super-chilled fuel that can be shipped around the world. At least before the Iranian missiles arrived. “I woke up this morning and thought, ‘No, please no,’” said Anne-Sophie Corbeau, a former head of gas analysis at BP who is now at Columbia University’s Center on Global Energy Policy. “This has always been my nightmare scenario, my Armageddon scenario, the one I didn’t want to happen.” Two gas traders said they were struggling to process the news after Iran launched a double-tap strike, firing ballistic missiles into the facility, first on Wednesday night then again in the early hours of Thursday morning. “This is unprecedented,” said one of the traders.
—FT, Armageddon scenario’ for gas markets as Qatar hit by missiles
Of course, this is just the latest blow. The global energy infrastructure was already reeling from previous strikes, and we should expect many more to come. But forget the immediate consequence of rising fuel prices for a moment—because I think an even more consequential shock will be the one seen in food production. This is a second-order consequence that will impact everyone.
As Al Jazeera reported this week, American farmers are already facing a 25% fertilizer shortage, given nearly half of the world’s traded urea—the most widely used fertilizer—flows out of the Gulf through the Strait of Hormuz. Global agriculture is completely exposed to the disruptions we’re witnessing. Energy costs rising like this will cripple farmers and they’re going to be forced to cut back in planting, meaning the dominoes are already falling.
This is crisis squared. The financial system was already unraveling before this energy shock. The global economy was already on life support, with the real economy showing signs of a major recession. Adding in an energy crisis is a catastrophic final blow designed to maximize the devastation of the coming downturn.
In my latest episode, I break down why this really is Great Depression 2.0 and why now is the moment to get ahead of it. Because once the panic starts, the shelves will empty fast.
Mike
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