The whirlwind of announcements from the White House, after a month of war, points to confusion as the hallmark of Trump’s approach. On the one hand, the enemy’s capitulation is proclaimed; regime change is flaunted (reduced to the assassination of Khamenei); claims are made of Tehran’s pleas to negotiate, of oil being offered, and even of an invitation to the Tycoon to lead the country. On the other hand, ultimatums follow one another: two, then five, and finally ten days of suspension of attacks on energy infrastructure (which Israel has not halted as a matter of fact), within which Iran is expected to surrender or at least reopen Hormuz. A draft agreement emerges, delivered via Pakistan, under which the United States — in exchange for co-management of the Strait and the complete lifting of sanctions — would impose conditions on nuclear and missile programmes essentially identical to those Iran had accepted with Omani mediators only hours before Israel launched its attack, thereby rendering them now unacceptable to Tehran. Meanwhile, the Pentagon deploys troops and equipment for a ground offensive that many fear would become a futile bloodbath.
Yet, from these contradictions, one clear element emerges: the two “magnanimous” extensions of Trump’s ultimatums coincided with movements in financial markets — the fall in dollar-denominated transactions and the rise in yields on ten-year US Treasury bonds to 4.5%. This is the exact opposite of the interest-rate policy and defence of dollarisation of the global market that Trump had promised to revive. Alongside fuelling remarkable speculation on crude oil (with suspected insider trading by a handful of operators who anticipated the statements by fifteen minutes), the albeit fleeting stabilising effect of the “announcement effect” underscores the economic motive behind the war — and its miscalculation. Drawn in by Israel or not, and regardless of the alleged promise of a lightning war — with which, according to the New York Times, the Mossad convinced Washington to act by claiming it could foment an internal coup —, the White House appears intent on preparing for multipolarity only after having crippled Beijing by sabotaging the use of the yuan in Venezuelan and Iranian energy exports. The aim is to safeguard the dollar as a hegemonic instrument for financing the enormous public debt, attracting investment and enforcing sanctions, in line with the framework introduced by Nixon after the Vietnam debacle. Trump appears to have embraced the slogan coined by neoconservatives in 2001: “creative destruction”, that is, destabilising the system while relying on the United States’ ability to attract capital flows unsettled by chaos. Yet today, this magnetic effect no longer rests on structural credentials as solid as in the past. This is all the more so if the systemic crisis on which Iran is capitalising undermines the very production of capital that Washington seeks to attract. This applies to Europe which, deprived of Russian gas, now suffers the destruction of Qatari liquefaction plants targeted by Iranian raids. It also applies to the Gulf monarchies. In exchange for protection from external threats and internal support for their neo-feudal regimes, they had pledged to Kissinger perpetual loyalty to the petrodollar and investments overseas. Today, Iran’s retaliation is undermining the entire system.
Iran’s resilience cannot be unlimited. Yet prolonging the conflict to the point of exhaustion, challenging the adversary to endure, appears to be the only way to avoid facing renewed attack in the near future, with all the damage already sustained. Long prepared for such a scenario, Tehran now maximises the economic dimension of the conflict, playing out the same game as the US. It is therefore incorrect to describe its conduct as asymmetric. Rather, it follows a qualitatively escalatory dynamic in the selection of targets. This is now evident as the conflict not only drags on but tends to widen, with the involvement of the Yemeni Houthis who, by blocking the Red Sea route through the Bab al-Mandab Strait, could prevent any circumvention of Hormuz.
The vicious circle also concerns the capacity of the Western military industry to provide support, as it is hampered by rising material costs and energy shortages, while the Pentagon raises the alarm over dwindling stocks of Tomahawk missiles and interceptors.
Moreover, the selective blockade of the Persian Gulf in favour of fleets from non-hostile countries (paying tolls in yuan) undermines the logic of “a trouble shared is a trouble halved” that might have eased Trump’s concerns. Russia, meanwhile, is increasing revenues from gas and oil exports, as demonstrated by India’s large-scale purchases, accompanied by acquisitions of air defence systems. China, anticipating this scenario, has stockpiled one million barrels of Iranian oil per day for over a year. While Washington shows the world its willingness to overturn the system of interdependence in order to preserve its primacy, Beijing and Moscow stand by, faithful to the Napoleonic adage that one should never interrupt the enemy when he is making a mistake. Yet the moment may come for them to take some initiative if the crisis reaches an intolerable threshold, perhaps even under tacit encouragement from the White House, which already feels the pressure of influential domestic financial elites.
For its part, the United States urgently needs to ensure that it can halt the conflict without Israel, who, left alone, acting recklessly, may trigger a nuclear catastrophe on a wider regional scale. It cannot be ruled out, however, that Netanyahu may seek, as compensation, a free hand to occupy southern Lebanon, replicating the Gaza scenario, as suggested by statements from his minister Smotrich regarding annexation.
As the ultimatum approaches its expiry, having failed to pass the buck to NATO, Trump needs to conjure up a victory. The threat of a landing operation, if it fails to act as leverage for an agreement, could result in the occupation of Kharg Island, allowing him to proclaim success and withdraw. Yet even if he succeeds, the loss of lives would prove disastrous for domestic consensus — now down to 40% — and could undermine the midterm elections. The coming hours will be decisive in determining the outcome.
The post Iran-US war, Trump between ultimatums and markets: oil, Hormuz and the dollar at the centre of the US strategy first appeared on AgenSIR.