Closing the Strait of Hormuz was once considered so unthinkable that energy experts were "laughed out of the room" for even considering it in their models.

Why it matters: The critical waterway has been effectively closed for months, creating a global economic crisis, and there's no real playbook for what comes next.

The big picture: The strait is the single most important chokepoint in the global energy system.

• It's a key economic artery for numerous products, including roughly one-fifth of the world's oil and liquefied natural gas.
• Some experts seem to have believed, on some level, that it was effectively too big to fail.

Zoom in: In at least two major exercises assessing potential oil disruptions, experts considered a full shutdown, but ultimately didn't model it in their planning because it was deemed either too unlikely or too large in scale to meaningfully plan around:

In 2007, a group of experts considered modeling a full closure — then rejected it.

• "The discussion was, 'Come on guys, it has to be credible. That could never happen,'" said Sam Ori, who worked on the exercise at the nonprofit Securing America's Energy Future, at a recent event.
• Modeling it meant confronting an "economic apocalyptic scenario," said Ori, who is now executive director at the University of Chicago's Institute for Climate and Sustainable Growth.
• "The idea was laughed out of the room," he said.

A 2022 task force led by representatives of countries that are part of the International Energy Agency also sidestepped a full Hormuz closure.

• Convened to assess the best allocation of strategic oil reserves in the event of a crisis, the participants didn't consider it for two reasons, said Landon Derentz, a member of the task force at the time while at the Energy Department.
• It had never happened before. And it was seen as requiring a global response beyond what the IEA could realistically coordinate, said Derentz, now at the Atlantic Council.

"Even if you convinced yourself maybe we should exercise it, the consequence of shutting the strait down was so significant that you couldn't really respond to it as an institution alone," Derentz said.

• "It would require, at that point, a global response and scale of diplomacy that extended significantly past what is within the bandwidth of the IEA."

Between the lines: This looks like a real-world version of the "dismal theorem," coined by late Harvard economist Martin Weitzman.

• The idea is that extreme, low-probability scenarios can overwhelm conventional analysis — and fall outside normal policy planning.
• Some experts also bring it up in the context of the belief that home prices would never meaningfully fall, as happened in the financial crisis.

What they're saying: Since the strait isn't a canal like the Suez or Panama, the potential for it to be closed "was probably underestimated," Patrick Pouyanné, TotalEnergies CEO, told Axios in a recent interview.

The other side: An IEA spokesperson and a former top IEA official both said the agency has long considered the risks associated with a closed Strait of Hormuz in its emergency planning, including in 2019.

• Derentz said the 2022 task force was a separate exercise and focused specifically on the countries' abilities to respond to an oil crisis with their existing reserves.
• Militaries have also extensively modeled the conflict risk around the strait — but usually separately from energy planners and economists, Derentz said.

Yes, but: The world these models were built for has changed.

• The 2007 scenario "was before drones," said Daniel Yergin, a leading energy expert who participated in that exercise. "A cheap drone can now do enormous damage to a very large oil tanker."

The bottom line: The current disruption is testing the assumptions behind how extreme risks are modeled — and who is responsible for planning for them.

Disclosure: Amy is the inaugural journalism fellow at the University of Chicago's Institute for Climate and Sustainable Growth.

Kalshi is putting in place new tools to prevent minors from trading on the prediction market, but is resisting calls to block ages 18-20.

Why it matters: Prediction markets are surging in popularity as a way to risk money on sports, politics and news — but they're also facing mounting political scrutiny over their contribution to America's gambling culture.

Driving the news: Kalshi CEO Tarek Mansour tells Axios that while kids are already banned from trading on the platform, the company is taking several additional steps to prevent them from doing so, including:

• Requiring all users to use facial recognition technology when opening the app, making it more difficult for kids to use family accounts to log in.
• Requesting selfies of users deemed to be at higher risk of problematic trading. And promoting two-factor authentication.

What they're saying: "We're essentially proactively doing that before we're required to do them because we think a lot of these measures are the right thing to do," Mansour says.

• "The goal for Kalshi here is we want to set a … new state-of-the-art benchmark when it comes to customer protection."

Threat level: The moves come amid growing concerns about young people — especially boys and young men — engaging in harmful behavior on sportsbooks and prediction markets.

• 36% of 11-to-17-year-old boys say they gambled in the last year, including 49% of 17-year-old boys, according to a July study by Common Sense Media.

The other side: Mansour has repeatedly argued that prediction market trading should not be treated as gambling, in part because users are engaging in peer-to-peer trades and not betting against the house.

• But Kalshi and other prediction markets are coming under pressure from lawmakers to implement consumer protection measures.
• Last week, Sen. Kirsten Gillibrand (D-N.Y.) and Sen. Dave McCormick (R-Pa.) introduced the Prediction Market Act of 2026, which would require self-exclusion programs and mandatory age verification.

The intrigue: The NBA and the PGA Tour last week called for prediction markets to raise the trading age to 21 to match American sportsbooks and casinos in most states.

Mansour believes the minimum age of participation should remain 18, arguing that it's no different than equities trading, including particularly risky areas like certain options markets.

• "They should be treated the same," Mansour says.

Retail investors remained wary in April for a second consecutive month, even as stocks had their best monthly performance since 2020, new data from Charles Schwab shared exclusively with Axios shows.

Why it matters: Uncertainty over the Iran war's impact continues to inject caution into the market.

• Schwab clients were net sellers in nine of the 11 S&P 500 sectors in April, buying only the traditionally defensive sectors of consumer staples and utilities.

Yes, but: "You have to take this report with a little bit of a grain of salt," Joe Mazzola, head trading and derivatives strategist at Schwab, tells Axios, noting that investors in April typically sell ahead of tax day.

• And clients looked to stay in the market but with reduced risk — Schwab saw a significant number of clients rotate out of individual stocks and into broader market exchange traded funds, which lowered the index's score.

By the numbers: The Schwab Trading Index, or STAX, slumped to 50.10 last month, from 56.04 in March.

• The decline was much sharper than the previous month's, when the index fell from 57.32 in February.
• Schwab examines the stock positions and trading activity of millions of its customer accounts.

What to watch: Investors may be starting to become less defensive and more bullish, a separate attitudinal survey by Schwab indicates.

• While bearishness in the survey declined, it is still very much connected to views about oil prices, inflation and the Iran war.