Overnight last Thursday, the U.S seized an opportunity to take out Iran’s most senior military commander, Soleimani.
In spite of the likes of the EU, China, and even Russia playing a role in the Middle East, the U.S went it alone. Even the UK was left in the dark and only discovered of the drone attack on the ground in Iraq, as it was unfolding.
Unsurprisingly, the markets balked at the unexpected airstrike. We have seen the U.S President even rub shoulders with the likes of Kim Jong-un, in spite of frequent nuclear tests and the threat of attacks on U.S allies and even the U.S.
Even such action failed to spur Trump into action.
Trump has ultimately had Iran in his sights since seeing an opportunity to take the Oval Office. After pulling the U.S out of the nuclear agreement, it was only a matter of time before things escalated.
Iran resumed its enrichment program, breaching the terms of the agreement that remained in place, even with the U.S withdrawal.
The U.S president also reintroduced crippling sanctions and demanded that no one buy oil without a U.S waiver.
It was a stage set for what has unfolded and perhaps what is to come…
With the U.S and European majors sitting at or close to record highs, any excuse to jump ship would have been good enough.
The threat of a lengthy proxy war in the Middle East, between the U.S, Iran, and its allies, just surged on Friday.
Interestingly, the timing of the airstrike coincided with Trump’s imminent impeachment trial, leading to questions over motive.
President Clinton also launched an attack on Iraq, back in 1998. The launch had coincided with the House of Representatives’ approval of two articles of impeachment.
While a military conflict in the Middle East would most certainly delay any impeachment trial, it may also end in Trump’s demise.
Iran’s supreme leader, Ayatollah Khamenei has promised revenge. The regime’s reaction is hardly surprising. What Trump may not have considered, however, was a unification across the country to revenge the drone attack.
We have seen the regime have to deal with uprisings within the country as sanctions bite. A U.S military strike against a nation already under pressure and clearly singled out risks more than a simple retaliatory response.
Unlike back in 1980 and the 10-year war with Iraq, Iran is an altogether different beast 40 years on.
Iran’s presence within the region has strengthened over the years. This has come in spite of Saudi and Israeli attempts to limit its rise in power.
Civil war, unwanted American meddling and more have contributed to this.
While the U.S President had talked of a desire to withdraw from the Middle East, the latest move leaves the U.S with no choice but to encamp for the foreseeable future.
Alarmingly, however, it may not be the proxy wars that deliver the biggest blows to Western nations that are likely to be drawn into a military campaign.
It will, once more, be the threat of terrorist attacks on the home soils of those involved in bringing down the so-called Shiite axis of evil that could lead to the unthinkable.
Iran is in no position to sit back and play it safe. The country will expect a response and a strong one.
In contrast, U.S voters have just been subjected to an extended trade with China that had earlier raised the prospects of a recession.
The war friendly farming belt suffered the most at the hands of Trump’s trade war that may question just how much support the U.S President would get should an extended conflict hit the U.S economy.
Not too dissimilar to the U.S President, Democratic front runner Bloomberg also comes from a different world. The only exception is that Bloomberg has the experience of being the Mayor of New York.
Trump’s moves since his victory, back in 2016, left a military conflict all but inevitable.
This is perhaps a conflict that few have wished for, however.
Voters have already hit the streets, protesting against the airstrike. This will likely become more far-reaching should the U.S respond to any retaliation from Iran.
No one likes uncertainty, and Iran’s reach and strength within the region bring plenty of uncertainty over what lies ahead.
Bloomberg will be licking his lips at the prospect of an unwanted conflict in the Middle East. Trump may have just taken on a bit more than he can chew.
Either way, voters don’t like seeing strong gains from the equity markets vaporize. That would hit consumer confidence and consumer spending hard.
Global trade terms remain a concern, in spite of the phase 1 agreement. It would be a bitter pill to swallow for a President who claimed to make America great again…
One other consideration is whether China and Russia will stand by or provide support to Iran. Both have strong ties with the regime… That would tear up any trade agreement for sure… It would also raise the possibility of an altogether different conflict in the East.
Trump has had the backing of his party in the lead into the impeachment trial.
That does question whether such action was needed to distract and detract from what was unlikely to result in an actual conviction.
The attack could lead to the loss of in party support, however… Time will tell.
Iran has already been involved in disrupting oil supply, so we can expect more of that. While positive for crude oil prices, that would be negative for oil-dependent sectors, including air travel and manufacturing,
Risk aversion would also drive demand for the safe havens, such as the Japanese Yen and gold.
Military stocks would also get a boost. This is assuming, of course, that there is retaliation in the coming days…
This article was originally posted on FX Empire
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