Iran/Israel debrief: A very soft response from Iran – No risk of wider war
Read our analysis before panicking and be ready for markets to open on Monday
Good morning everyone – what a dramatic night in the Middle East and what a couple of days we have in front of us. Just a quick update on our take on things. Note that this is written Sunday morning CET and that events are still unfolding. This is an attempt to get you covered for market open on Monday, but events could still change the picture during Sunday.
Situation:
- Saturday night local time, Iran launched the much-anticipated retaliatory strike against Israel after the latter’s attack on the Iranian embassy in Damascus last week.
- The attack comprised of several hundreds of Iranian missiles and drones launched mostly from within Iran.
- Israel and Western forces in the region managed to shoot almost all the missiles and drones out of the sky over neighbouring countries and the damages from the attacks were only minor.
- Bitcoin prices plummeted as markets await Monday for wider fall-out.
Analysis:
- In my view, this was a very soft response from the Iranian side. They only targeted Israel with drones and slow-going missiles who they must have known would mostly be shot down over Jordan and Syria before hitting targets in Israel.
- Iran didn’t send it’s air force, didn’t attack Western assets with ground forces or similar. There is a lot that Iran could have done that they didn’t do.
- The messaging from the US seemingly interpreted the Iranian strike exactly like that as well. The US signalled clearly that they wouldn’t support any offensive Israeli moves – which is a clear message to Iran that the US acknowledges the Iranian attack as “completing the cycle of aggression”.Some questions I’ve had:
- All in all – this was almost exactly as we predicted last week and I think both the Israelis and the US are rather relieved at how the attack unfolded.
What comes next:
- The most likely outcome is that this circle of violence ends here. This is NOT the start of a wider war or World War 3 as some would have you believe.
- Israel may carry out further attacks, but that would be without US support and most likely smaller in nature – perhaps directed at Hezbollah in Lebanon or other Iranian proxy groups.
- Fallout to markets are likely to be limited and short-lived – so if we do indeed see markets drop on Monday, use it as an opportunity to buy and wait for the correction.
- One risk, however, is that Iran may respond to further Israeli attacks by targeting shipping in the Persian Gulf, which would be disastrous for global oil and gas supplies – but that is not the most likely scenario right now.
So all in all – keep calm and read Steno Research! Don’t buy into the media hysteria but remember that in the Middle East, sometimes things have to be settled by throwing some missiles around rather than at the negotiating table.
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