Submitted by Peter Tchir of Academy Securities
Iran (and the potential for a deal) has continued to move markets. As the 30-year bond rose above 5% earlier this week, we got news that we have a new approach to resolving the conflict – a one-page MOU. Markets (ex-oil) rallied around various “deal” headlines all week.
Spider, Bret, and I spent some time discussing this on Friday’s Podcast –The U.S. Proposal to End the War(also available on Spotify and iTunes).
Information continues to leak out in dribs and drabs about how those negotiations are doing. There continue to be conflicting messages. In the back of my mind, I’m increasingly forced to remember what we mentioned at the start of the conflict –Iran has never won a war but has never lost a negotiation.
There was a time when that statement didn’t seem likely to be reflective of this conflict. From “unconditional surrender” to various other metrics (especially surrounding nuclear weapons capabilities) we seem to be drifting to –let’s open the Strait and figure out the rest later?
The U.S. has displayed exceptionalism on every military task that it has been asked to undertake during this conflict. While we have had a limited presence in the Strait, our maritime efforts have been successful in accomplishing the missions that have been defined. Yes, Project Freedom was short lived. Not so much because the U.S. couldn’t deal with the threat (we successfully defended ourselves against Iranian missiles, drones, and small boats), but because it became pretty clear that not many commercial vessels were ready, under current circumstances, to risk challenging Iran.
We did argue, earlier in the week,that the admin’s assertion that Iran only has a few weeks before its economy collapsed, was underestimating the Iranians. They in all likelihood have prepared for this economic pressure and likely have significant IOUs with countries like China (and possibly even crypto holdings) to survive months not weeks. A regime that will shoot 40,000 or more citizens in a week for protesting is not going to be overly concerned with “standard of living” issues. Finally, all the “hype” around the fact that Iran’s ability to store oil is running out and this is causing them to shut the pumps (resulting in long-lasting damages) seemed “optimistic” at best. Iran has been decreasing the pressure, reducing the flow, and giving more leeway to when their reservoirs fill up. They also have the ability to just pump oil back onto the sand (and there are some reports of oil slicks in the Gulf). So, yes, if they left their facilities on full pressure, and were worried about “dumping” oil, it might be a week or two before irreparable damage is done. But they aren’t doing that. Also, according to many in the oil industry, other countries in the region are employing the same tactics. It isn’t just Iran that faces an inability to load oil onto transportation systems (pipelines or tankers). Much of the region faces similar challenges from the inability/unwillingness to transit the Strait.
A deal would be good, but a good deal would be better.
We discuss our views, options, and even highlight a couple of possibly great outcomes in the podcast (linked above), butwe do seem to be drifting towards expediency rather than something more comprehensive.
I am still in the camp that the U.S. will once again become frustrated with Iran and launch another set of attacks, to truly push this conflict to a conclusion that leaves the world much safer.
Source: ZeroHedge News
