Once again, here are my initial thoughts:
First, let us assume that Iran’s nuclear weapons capabilities are off the table. That is a huge win for the world. Iran is a terrorist state. No one wants it to have nukes, outside of Putin;
Many countries will protest, but down deep, they are happy this has been done;
Iran with nukes sounds like a strike on Israel, another land war in the Middle East, plus $400/barrel oil and a global re/depression;
Trump says he wants peace now. The Iranians may find that curious, but what are their options?
Block the Straight of Hormuz? No way. The U.S. has two carrier groups descending on them right now. It’s not going to happen. We own the deep, and again, the world is happy for that as everyone benefits when the U.S. keeps the shipping lanes open;
Houthis attack U.S. ships? If they stick their heads out of the sand, I would expect their heads to be freed from their bodies. We have seriously degraded the Houthi capabilities over the past months;
Hezbollah attacks Israel? Not going to happen. And if it does, it will be a wipeout;
Iranian assets attack U.S. bases in Iraq and other places in the Middle East? Possible, but those places are bristling with guns and they’re waiting for it. Seems like suicide missions with little to no payoff;
Terrorism? Definitely possible, but think it through. Iran activates some sleeper cells and they hit some major U.S. cities somehow. OK, damage has been done. Now have fun with daily sorties of those B2 stealth bombers that you have no way to see or stop, and which can drop precision bombs anywhere, anytime. Your pipe bombs made out of fertilizer versus U.S. 30,000 pound ordinance. I’m going to call that a really bad trade.
Back to the peace plan. How does it work?
The bombing actually gives Iran an out and a way to save face. They can say they fought the “Lesser Satan” (Israel), and the Israelis couldn’t beat them, but Iran couldn’t beat Israel plus the “Great Satan” (the U.S.), which is true;
Iran agrees to have IAEA monitors, which is probably meaningless at this point, since most of their nuclear enrichment sites have been destroyed;
They get to sell their oil on the global markets again, instead of at an estimated 30 percent discount to the Chinese, which greatly benefits their government finances;
Plus, other embargoes get lifted and the Iranian people get to rejoin the global economy;
This could all be negotiated over a cup of coffee;
There weren’t huge numbers of civilian casualties, so the people won’t be calling for blood, and maybe there is no internal regime change.
Markets
There’s only one market open at 9:12pm on a Saturday night, and that market likes it.
Chart 1: Bitcoin Price - Intraday
I think the price of oil comes down 4-5 percent on Monday. Stocks will love that. Bonds will love that (because lower oil prices mean lower inflation, which means interest rate cuts are closer.) The dollar probably falls 50-100 basis points, as the safety trade gets unwound. All risk assets will like that, commodities will like that.
Gold will fall in the short-term.
Trump will speak to the nation at 10pm tonight.