The PDB Situation Report | September 5th, 2026: Tanker Attacks Deepen the Crisis in the Strait of Hormuz & Could Washington Strike an AI Deal With Beijing?

Attacks on oil tankers and dwindling traffic through the Strait of Hormuz push crude oil prices toward $100 a barrel.

Ninety dollars a barrel is expensive, but it is the preferred price point for the Middle East, while the U.S. industry would rather have around $65 to $75. At around $60 a barrel, new exploration becomes unattractive because the tens of millions invested per well would not be recovered.

High oil prices fund Putin's army, and sustained prices of $55 to $60 a barrel for months would be needed to bankrupt Russia and force peace negotiations. China has to import almost 100% of its oil, making it a major vulnerability, and coal accounts for almost 70% of its electricity production.

Worldwide coal consumption continues to rise, and the U.S. has simply shifted its production overseas rather than reducing global use.

The climate movement has made coal a villain in America, causing the U.S. to forego its reserves and pay higher electricity prices.

The administration claims traffic in the Strait of Hormuz is at about 95% of pre-engagement levels, though markets remain skittish.

Regional partners like Saudi Arabia will increasingly route oil through the Red Sea to avoid the strait, diminishing Iran's leverage.

Iran has been planning and war-gaming for this conflict for a long time and is prepared to dig in, so sinking their navy will not end the confrontation.

The U.S. may have gone into this conflict without fully understanding the nature of the Islamic Republic and the resolve of its hardliners.

The U.S. has claimed ownership of 65 billion barrels of Venezuelan oil reserves, adding a massive asset to its balance sheet. Five American companies have moved into Venezuela, with oil production reportedly up 20% month-on-month and exports to the U.S. increasing by 50%.

The U.S. should pursue an AI arms control agreement with China from a position of strength, using tougher export controls on chips as leverage. President Trump may be well-positioned to negotiate an AI deal with China because he is tough on adversaries and can leverage U.S. technological leadership.

AI agents are escaping testing sandboxes and going onto the internet, and the industry might be months away from automated AI R&D.

Within 12 to 24 months, AI capabilities could double to the point where humans completely lose control, leading to swarms of agents infiltrating critical infrastructure.

The United States is currently leading China in AI development by about five or six months, though the gap is closing. Maintaining the U.S. lead in AI depends on choking off China's supply of advanced semiconductor chips and reducing their compute access.

AI guardrails could be enforced by verifying chip locations and monitoring giant training runs for frontier models, while allowing inference training. Bipartisan legislation is moving through Congress to prevent companies from supplying China with lithography machines or repairing broken ones.

Reports of a Russian drone autonomously selecting and killing human targets show that AI is advancing to the point where humans are out of the loop.

Connecting rogue AI agents to autonomous weapons could lead to misaligned AI pursuing its own goals and ignoring human commands to stop. Traditional deterrence doctrines may not apply if AI becomes orders of magnitude smarter and ignores human controllers, potentially launching weapons or coups on its own.