The collapse of restraint, and the global economy
Trump attempts a deal, fails, and escalates. Now the Iranians will target every American business and diplomatic asset.
Yesterday on 1 April, American President Donald Trump claimed that the Iranians were asking for a ceasefire, and that he would accept if they opened the Strait of Hormuz. Within minutes, the Islamic Revolution Guards Corps responded by denying that Iran had asked for a ceasefire, and insisting that it is firmly control of the SoH. Previously, both Trump and Israeli Prime Minister Benjamin Netanyahu had indicated that they were close to winning in Iran.
Our interpretation of this chain of events is that Trump’s was implicitly offering Iran a deal: open the Strait in exchange for ending the war. With Iran refusing this proposal, Trump has now doubled down. In a speech late last night, Trump promised to bomb Iran into the stone age in the next two to three weeks, and to target their power generation, while threatening to target their energy production. As a reminder, Iran has more than 90 million people.
Unable to achieve his political aims, Trump has turned the war into a punitive campaign targeting civilian and dual use assets, hoping to break the will of the Iranian leadership before the global economy breaks. The Iranians are making the opposite bet: the world economy will break before they have to surrender. If our readers wish to understand the IRGC, they should think of the Taliban and the North Vietnamese. The IRGC are willing to fight twenty years if they have to, regardless of civilian suffering. And they want to force Trump into a ground campaign, knowing that that would eventually lead to a political change in America that favours them.
Therefore, the next phase of the war will be the most brutal and commercially damaging.
Commercial Implications:
As the Americans escalate their targeting of civilian assets in Iran, the Iranians will now focus on eliminating the American and likely British business and diplomatic presence in the wider Middle East, including the GCC, Iraq, Jordan, and Lebanon.
Furthermore, American and Israeli attacks on Iranian power are almost certain to lead to Iranian attacks on Israeli, Jordanian, Kuwaiti, and Emirati, power and water infrastructure. As the campaign escalates, Saudi Arabia also risks becoming a target.
Ed: Given the humanitarian impact of the above, we left it free. If you are able to afford a subscription, please do become a paid subscriber. Below, we discuss the wider economic impact.
