After Israel and its allies (with the help of some Arab states that don’t want to see a wider Middle East war and who aren’t thrilled with the growing power of Iran and its proxies) succeeded in shooting down almost all of the drones (170), ballistic missiles (120), and cruise missiles (30) launched by Iran against the country, will the two sides both declare victory and claim that honor is satisfied or will one or the other escalate the war with another round of attacks?
Oddly enough Israeli Prime Minister Benjamin Netanyahu has sounded restrained and conciliatory after the Iranian attack. But his more extreme partners in the country’s war-time cabinet have called for an escalation to punish Iran.
At the moment, the Iranian Supreme Council has been equally restrained, to the degree that an attack with more than 300 munitions can be seen as restrained. Diplomats outside the region have noted that the Iranians gave Israel and its allies enough warning before the attack so that they could limit the damage. How much disagreement there is in Iranian government circles is, however, anyone’s guess.
The coming week could bring a continuation of the conflict in Gaza at its recent levels of horror or new attacks on Israel or Iran that could completely destabilize the region. (I recognize that talking about a stable Middle East at the moment is not a solution to the crisis in Gaza.)
As of early Monday trading in Asia, the oil and gold markets have reacted with concern but not panic. Gold, up 13% already this year to a record above $2,400 an ounce, moved higher but the gains were relatively modest. Spot gold climbed 0.8% to $2,361.92 an ounce as of 6:20 a.m.in Singapore.
The global oil market opened to the upside but by less than 1%. And prices have been steady to slightly weaker since then.
My opinion: Absent either convincingly loud saber rattling or an actual attack, the gold and oil markets are likely to consolidate last week’s gains. The dollar, meanwhile, is likely to continue to march higher since it is not only a safe haven in a Middle East crisis but has speculation about a delay in interest rate cuts by the Federal Reserve at its back.
That would likely mean higher Treasury prices this week and more downward pressure on stocks as the financial markets wait for the beginning of earnings reports from Big Tech next week.
