Submitted by Michael Every of Rabobank
While mediators are pushing to get Iran and the US back into negotiations on Friday, the US still says it wants to see unified response from Iran which hands over its enriched uranium. But what will change between now and Friday?Two things, perhaps, and both pointing towards an expected escalation before any deal.
In the broader Middle East, the US is now using Ukrainian counter-drone tech and support teams, underlining how rapidly things can change when tech and war get together. Certainties, production methods, and tactics and strategies can all flip faster than those at the top of large organisations realise.
Lebanon is said to be seeking a one-month truce extension of its current ceasefire with Israelas Hezbollah again targeted IDF troops with drones, drawing fire back, with casualties.The US embassy in Beirut is urging its citizens to leave the country amid security risks.
TheUS has suspended dollar shipments to Iraq and frozen security cooperation programs with its military to try to force Baghdad to act against Iranian militias active in the country. On the other hand, US Treasury Secretary Bessent claims several Gulf and Asian allies, not just the UAE, have requested dollar swap lines. That’s further extends the list of potential recipients outside the cloistered ‘economic policy era’ circle of the UK, Europe, and Japan, etc., as part of a new US ‘economic statecraft era’ aimed at anchoring the global role of the US dollar on US, not global, terms. Indeed, while FX markets still look at EUR/USD, GBP/USD, and USD/JPY as benchmarks, they are arguably far less important in the emerging physical economy of a new world order based on resources, industrial production, and AI.
Finally, aTrump envoy is seeking to replace Iran with Italy in the looming 2026 FIFA World Cup, which isn’t likely to shift Tehran from its strategy of playing for extra time and winning on penalties.
The ‘Minecraft’ story above is crucial to note. The marine drones now being employed are relatively untested compared to older minesweeping techniques,but estimates using previous benchmarks run from weeks to months to clear Hormuz, depending on how many mines are present. That could add to an energy normalization timeline which already risks seeping into Q4. (See our latest analysis from Joe Delaura and Florence Schmithere, but note that it says in red, bold font: “Futures markets are still materially under-pricing the real supply risk facing both crude oil and natural gas.”)
The Iran war is also driving upPanama Canal lane prices to a record high of up to five times the pre-war level, mainly as Asian LNG importers bid for access.
EU-Turkey relations have separately nosedived following impolitic comments just before an EU summit today in… Cyprus.Its key itinerary covers plans for the energy crisis, “defensive autonomy”, and strategic links between Europe, the Middle East, and India.
In terms of that defense autonomy,Trump is reportedly considering a tiered system for NATO to reward allies who rearm and are willing to fight, and punish those who don’t and won’t (and won’t allow the US to use the bases they have built on their territory). It might imply a shift of US forces, and focus, from west to east Europe, and perhaps from Spain to Morocco.
Source: ZeroHedge News
