With no end in sight of the US and Israel’s bombing of Iran, language from the Pentagon has also hardened. Washington says it “will not give up until the Islamic Republic is beaten” and will pursue that objective on “a timeline of our choosing”. Yet the harsher reality is that there is little precedent for the collapse of a regime through air power alone.
The White House now faces three distinct scenarios:
- First, the US’s Gulf allies are suffering severe economic disruption and are rapidly running down their stocks of interceptors.
- Second, the US economy is seeing falling consumer confidence and rising gasoline-led inflation, just months before November’s midterm elections.
- Third, without a credible way to escort tankers safely through the Strait of Hormuz, a serious shortage of oil and gas is beginning to emerge globally, particularly across Asia. Against this backdrop, the president is due to meet his Chinese counterpart in Beijing later this month.
Guy Monson assesses the issues, and the impact on investors with the equity market reaction having been relatively modest so far on a 12-month basis.
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