Rabo: Even If Iran Does Not Close Hormuz

Gulf Insider

5 days ago

The world didn't have to wait long for Donald Trump to make up his mind over bombing Iran's nuclear facilities. Trump last week suggested that he would make a decision 'within the next two weeks', but that appears to have been a case of misdirection with a mission already in train to strike Fordo, Natanz and Esfahan.
Seven B-2 Spirit bombers deployed from Missouri dropped fourteen 30,000lb bunker buster bombs (the world's most powerful non-nuclear weapons) on Fordo and Natanz, while a guided missile submarine hit the Esfahan facility with dozens of Tomahawk missiles. Trump, Hegseth and the Chairman of the Joint Chiefs have said that the strikes were an overwhelming success, 'obliterating' the Iran's nuclear program.
Markets are, predictably, in risk-off mode this morning as traders contemplate what comes next, but given the gravity of the event the moves are perhaps surprisingly small.
Brent crude rallied up as far as $81.40/bbl in early trade, but has fallen back below the $80/bbl level at time of writing. The Dollar is again burnishing its credentials as a safe-haven asset with the DXY index up 0.32% to 99.05, equity futures are pointing negative, Bitcoin is lower, sovereign curves are steepening and European gasoil futures are up a little more than 4.5% as markets again judge that Europe stands to be a loser on the energy front.
Interestingly, spot gold has reversed earlier gains to be down $14/oz at time of writing following news that Iran has been liquidating reserves in a dash for liquidity. Keep an eye on the SOFR fix.
Global Strategist Michael Every, writes
'While the U.S. may now prefer to reopen negotiations with Iran, the latter is in no mood to do so.
Iran's parliament has voted to close the Strait of Hormuz in retaliation for the U.S. strike on its nuclear programme, with the final decision resting with their national security council.
This would be unprecedented; economically ruinous for them; and for the world; almost impossible for them to do, as is; would ensure almost everyone who can would confront them to reopen the Strait; but… it's likely to see war insurance risk soar, and therefore push oil & LNG prices far higher.
All the usual 'rational' market voices are saying Iran won't do it when they are a regime that in the past specialised in suicide bombings and are here threatening an economic suicide bomb.
And as U.S. Secretary of State Rubio said: 'I would urge the Chinese government in Beijing to pick up the phone and talk to them. China relies heavily on oil that passes through the Strait of Hormuz. If Iran takes that step, it would be a serious mistake and a massive escalation,' who could last out a 30-day (for example) de facto closure of Hormuz better? Those with strategic reserves, like China, or those with much less, like Europe?
Russia is also threatening 'some countries' could send Iran nuclear weapons. It's a short short-list, and Russia and Iran will meet today – will this be on the agenda? Again, it seems unlikely as it would be unprecedented and could potentially even take us to the edge of a new Cuban Missile Crisis – but fat tail risks are evident.
So, how this all ends is still very much in the balance: regional peace — as Israel says 90% of Iran's enriched uranium was destroyed, it could stand down if Iran does, and the door has been opened to more Abraham Accords deals — or a wider war
Ridiculously, ahead of this week's key NATO summit, Spain claims it's secured an opt-out from spending 5% of GDP on defence. How? Who else will claim the same because shifting spending priorities or borrowing or trading more 'is unreasonable'? And this is just as Spain is shown as vulnerable to a closure of Hormuz as anyone else – and yet won't be able to contribute much to either this or any future geopolitical crisis if it doesn't spend more. What will the political ramifications then be?
This is also just after the FT ran an op-ed from an Eurocrat arguing Europe now has the chance to build itself in its own image thanks to Trump's hardball politics. Yes, all Europe has to do is build: a true single market; a capital market; a military; energy independence with no energy; its own tech firms; and globalise the Euro and get its own markets off the dollar – in a contested world where others would rather Europe fail than succeed; as
The Telegraph talks of how the 'naive' U.K. government thinks its domestic levers of power still work, but don't, let alone the international ones.''
With so many moving parts and the sense of more shoes to drop in central Asia, it's likely to be a volatile week ahead. All eyes will be trained on the Middle East for signs of Iranian strikes on US regional bases, or any attempts to impede energy flows through Hormuz.
Also read: Widespread GPS Jamming Across Strait Of Hormuz; Six Supertankers Perform Abrupt U-Turns