Investment Conclusion.
President Trump has not gone TACO on Iran. The US will attack Iran’s nuclear asserts (e.g. Fordow) if Iran does not totally surrender its nuclear assets in short shift. No more negotiations. No more ducking and weaving. No more enrichment. And no stop to Israeli bombing unless Iran surrenders the nuke assets. That’s what’s on offer. The war will go on until Iran accepts it.
The war can be neat or messy. The markets think President Trump has gone Taco. So the first reaction to US participation in the war will be “risk off”: higher oil and gold prices and falling assets. Then if the War turns out to be surgical, “risk-on” will follow quite quickly; after all a stable Middle East and plentiful oil plus validation of the US President’s strategy are all bullish – whether you like him or not.
If the Mullahs decide to go down in flames and block the Straits of Hormuz, the bear phase could last much longer. But it ultimately leads to the same place: the Mullahs will be history; Iran will start a long journey to becoming middle class; the Middle East will be much more stable, and Israel will be the regional super-power able to deal with the Arab states on that basis.
Ultimately that could even benefit the Palestinians by the creation of a twin state that buried the hatchet with Israel because nobody would fund them to do otherwise.
But I dream …. now back to war.