How can one not recall a Wall Street Journal article claiming that U.S. President Donald Trump had considered launching “preemptive airstrikes” against Iran to deter its nuclear ambitions? Alternatively, Washington could pressure Tehran economically by imposing sanctions on Chinese ports receiving Iranian oil or introducing tariffs on China to reduce its total imports from Iran.
The immediate consequence of a military operation against Iran would probably be a rise in oil prices. Despite US sanctions, Iran has remained OPEC's third largest oil producer, behind Saudi Arabia and Iraq, surpassing the United Arab Emirates. How is this possible? Like Russia, Iran employs the “shadow fleet” strategy and various commercial methods to circumvent sanctions.
Financial markets would not be left out either. When the heat is on — such as rising geopolitical tensions in key economic regions — investors usually start dumping riskier assets, and right now, cryptocurrencies are at the top of that list. Instead, they flock to safe-haven assets like XAUUSD. That said, it's worth noting that in recent years, the impact of negative news from the Middle East on investor sentiment has been short-lived.
The real game-changer would be if Iran attempted to disrupt shipping through the Strait of Hormuz and succeeded. That would make the risk of another inflationary surge very real, forcing central banks to respond — the same story as always. For now, though, investors aren’t pricing in that scenario.
This article was written by FL Contributors at www.forexlive.com. Read More Details
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