THE COMMODITY SQUEEZE WORSENS / MACLEOD FINANCE

The commodity squeeze worsens

Spot oil prices have yet to adjust to the oil shock emanating from the war against Iran. There’s further bad news: Hormuz is unlikely to open until the US admits defeat.

ALASDAIR MACLEOD

For a war that was originally going to last only three or four days, it is clear that the US has badly miscalculated. 

America is now over 100 days into it and counting. 

The odds in favour of it succeeding any time soon are diminishingly small. 

Not only is it not going to plan, but America’s options are increasingly restricted.

We can forget any ground invasion which would be required for a win, however pyrrhic. 

Temperatures are now too high for troops not climatised for them. 

The US and Israel are running low on ordinance, the former having depleted stocks by supplying Europe and Ukraine while Iran has an arsenal accumulated over the last 47 years and particularly since 2003 when the US destroyed Iraq.

Furthermore, there are credible reports that Iran’s hypersonic Fattah missiles are technologically superior to US and Israeli weapons, travel at Mach 10—15 and are virtually impossible to shoot down. 

Iran also has the backing of China and Russia, guaranteeing accurate targeting and technological input.

Read on for an increasingly certain outcome…

Last night’s escalation

Overnight, it appears that the US attacked water infrastructure in southern Iran. 

Iran responded by attacking US bases in Jordan, Bahrain and Kuwait, with the US 5th Fleet in Bahrain reportedly hit hardest. 

US defence drones and missiles being taken out leaves these host nations effectively defenceless.

Clearly, the Iranians are in control. 

Assuming Israel continues to attack Lebanon and particularly Beirut, she will be attacked in return not just by Hezbollah, but by Iran and the Houthis as well. 

And just to really add to the squeeze on the US, don’t be surprised if the Houthis close the Bab-el-Mandeb straits between Aden and Djibouti as well, effectively sealing off the Red Sea and the Saudi’s Yanbu oil terminal from the Indian Ocean.

It is increasingly difficult to deny that Iran is in charge, and there’s nothing President Trump can do about it other than make the US’s position worse. 

Israel finds herself in an impossible situation with America effectively defeated. 

With that defeat, expect perfidious Arabs to remove their support for Israel, leaving it increasingly isolated and surrounded by hostile Muslim nations.

Let this sink in for a moment. 

The very existence of Israel is now threatened along with the Zionist project. 

Her attempt to create a greater Israel has failed and she has nowhere to hide.

All this adds up to a clear strategy for Iran. 

She has no interest in ending this war until the protagonists admit defeat. 

The Americans cannot invade, and with Israel both combatants are running low on ordinance while Iran still has plenty. 

While China and Russia are supportive, there is no NATO-like Article 5 requiring them to declare war on the US and Israel. 

Iran is on her own and will act in her sole interests accordingly.

She has the means to tighten the screws on the US and has no need to negotiate. 

Clearly, she will keep Hormuz closed, attack her neighbours’ infrastructure and desalination plants so long as they host US bases and attack any US naval assets in range as part of a careful escalation.

As well as working with Hezbollah and the Yemini Houthis, she will continue to pressure the US until the G7 economies begin to collapse. 

In fact, Iran’s greatest asset is in mounting global dollar-based financial contradictions: the prospect of its ruin will likely force the US to retreat.

Capital markets will pay the cost

Meanwhile, financial markets in the G7 have not even begun to discount this increasingly inevitable outcome. 

Global energy and other vital Persian Gulf exports in short supply are lead to significantly higher prices for those goods. 

By drawing down on strategic oil reserves, the US has concealed this impact so far. 

But these reserves are running low. 

So, every day there’s a new skirmish or a new escalation oil prices will rise and fall back less and less as the immediate panic subsides. 

It will be a staircase to hell leading to a slump in economic activity, only offset by the Fed and other G7 central banks pumping extra credit into their economies to conceal the slump.

It is this debasement of G7 currencies, coupled with debt traps triggered by declining tax revenues due to the slump in economic activity which will undermine their fundamental value and credibility. 

Before this unnecessary war against Iran, central banks around the world were already selling fiat dollars for gold, foreseeing it’s demise. 

The war has simply accelerated the death of the post-Bretton Woods currency regime, bringing forward its end to a matter of only a year or two.