Strait of Hormuz Crisis: May 19th, 2026

Operation Disclosure Official

By David Lifschultz, Contributing Writer
Submitted on May 19, 2026

STRAIT OF HORMUZ CRISIS, MAY 19, 2026

Compliments of The Lifschultz Organization, Founded in 1899

I called the chief officers of the Pentagon to a lunch at the Harvard Club at the threatened Strait of Hormuz crisis in 2011-2012 and they told me that they could not keep the Straits open which equally applies today based on recent conversations. The weapons have not materially changed that much since then. Since I had then gone over the derivative question with Goldman Sachs I was quite prepared for this crisis today.  

The Bank for International Settlements estimates the global notional value of over-the-counter (OTC) derivatives to be approximately $846 trillion. This figure was drastically reduced sometime ago by a fake adjustment.

Just over 10 years ago, global derivatives were $1.2 quadrillion. Then the Bank of International Settlements (BIS) in Basel decided to halve the values to $600 trillion overnight by changing the basis of calculation. But the $1.2Q risk was still remained at the time.

Warren Buffett famously views derivatives as “financial weapons of mass destruction” and “time bombs” for both the parties dealing in them and the broader economic system. He argues that these complex financial instruments dramatically increase leverage, hide massive risks, and make it nearly impossible to analyze the true health of financial institutions.

The Core Dangers of Derivatives

Buffett outlined his concerns in his Berkshire Hathaway Annual Letters and interviews, highlighting several major threats: [1, 2]

• Infectious Risk and Counterparty Exposure: Large derivative positions concentrate massive credit risk into the hands of a few interconnected dealers. If one heavily leveraged institution fails, the ripple effects can quickly infect the others.

• Wildly Overstated Earnings: Because derivative contracts can run for years, their values are based on theoretical models rather than realized cash. This allows management to record huge paper profits long before the actual payout, which can mask dangerous levels of risk.

• Market Discontinuities: Buffett warns that in times of extreme market panic, the theoretical models used to price derivatives break down. This lack of transparency and liquidity can create a dangerous “poison” in the global markets. 

In other words the exposure is greatly understated. An authority went on to describe these derivatives as follows:

The collapse in 1998 of LTCM (Long Term Capital Management), set up by Nobel Prize winners and the 2007-9 Sub-Prime crisis is a clear proof of the ignorance of the risk of derivatives.

But this was not true. These positions were set up by most of Wall Street players who have great knowledge of the markets and derivatives, and LTCM had acted against the deep state players so they were not informed of the Russian default which destroyed their firm as they were not team players. Of course they knew everything that there was to know about derivatives. All the other major Wall Street firms were fine having advanced knowledge of the Russian default. Lehman went down for the same reason.

It is true that in the 2007-8 the subprime debacle created a tremendous implosion that required the Federal Reserve to create 22 trillion dollars of credit which was never shown on its balance sheet. We did not intend then to allow a 1929 crash. We knew what were doing when we issued that credit as we could not allow the US financial system to collapse and all the money was repaid.

Let’s go back to 1987. Here we had a new financial instrument that came into play called cash settlement. When it was placed above the market the players (major Wall Street Houses) on the last day pushed the market up above the settlement price and made a fortune. Then they did it in reverse shorting the market placing the cash settlement position below the market. Back and forth they went making fortunes. What happened was that on one settlement day the market continued its plunge threatening to bring down the entire financial system. The players sat on their hands as they were solidly in cash as they were covered. They had no intention of trying to save the situation by risking their own capital. They considered themselves safe.

I was called in to handle the emergency and telephoned Ted Truman at the Fed as coordinating helmsman.  Nobel laureate Paul Krugman described Truman as the “George Smiley of international economics“. Then I called the deep state to lay down the law to the Wall Street Houses. What we did was engineered a rescue by the Wall Street Houses placing their settlement derivative way above the market and then they were required to risk all their capital to push the market up above the settlement figure to stop the crash. There was no question that they would follow orders. They had no choice. It worked like a charm. This ended the crisis. We gave them no guarantees but they would not dare oppose the deep state as the consequences would be dreadful. We have identified the deep state in our book review of “Tragedy and Hope” by Carroll Quigley and we quote:

“The powers of financial capitalism had a far-reaching plan, nothing less than create a world system of financial control in private hands (Rothschild) able to dominate the political system of each country and the economy of the world as a whole.”

We covered this in detail in other reports available on request. As an example, Sir Evelyn de Rothschild handled the transfer of US industry to China based on currency manipulation explained in the next link of correspondence with the then Secretary of the Treasury.

Robert Rubin Correspondence – David Lifschultz

Of course, the major Wall Street Houses were risking everything but they had no alternative but follow our orders and knew we had the power in the next round to create at the Federal Reserve the required funding as we did in 2008 where we created 22 trillion dollars during the subprime crisis.

Now that we have our background established, we shall look at what we have today in the Strait of Hormuz crisis.  Here we have a blockage of 20% of the world oil supply. When the seven weeks were over after the closing when the last tankers delivered their oil, we now looked a major crisis in the face where Goldman Sachs in 2008 calculated that the closing then would drive the price of oil to $700.00 a barrel and then trigger the estimated two quadrillion derivative exposure generating the greatest world depression in history. (The Red Sea is handling some of this oil and Iran has made deals for some to pass through the Strait of Hormuz. In the event that the US attacks Iran we can expect the shortage to be 20 million barrels a day as the Houthi block the Red Sea and Iran imposes a complete blockade at the Straits of Hormuz. In other words we will face financial Armageddon.)

We are at the edge of the precipice right now. The US is now selling their own strategic oil reserves in a desperate effort to hold down the price of oil to block a derivative and stock market crash. The Presidential trip to Beijing was a desperate effort to solve this problem and China would not cooperate in the destruction of Iran. The trip was a total failure. Iran holds all the cards. All they have to do is hold out and the US financially crashes as well as the rest of the world.

Trump now has two choices. Face a total collapse of the US economy by continuing his blockade of Iran or yield.

As far as the nuclear weapons issue is concerned, yes, Iran has hydrogen bombs and ICBMs already from North Korea to launch on New York City, Washington, D. C. and Miami but those bombs would also knock out the communication systems of the United States. Iran has the United State under checkmate.

David Lifschultz
THE LIFSCHULTZ ORGANIZATION
DAVID@LIFSCHULTZORGANIZATION.COM

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