Donald Trump is trying to sit on two chairs. The US president wants to change the global order and at the same time support the US economy and financial markets. Hence, the policy is full of contradictions. On the one hand, the White House intends to send about 7 thousand military personnel to the Middle East. On the other hand, Washington sent Tehran a 15-point plan to resolve the conflict. Iran’s rejection of it, with its own conditions, inflated oil prices and brought down the EURUSD.
Tehran demands recognition of its control over the Strait of Hormuz and financial compensation for the damage caused by the war. He asks not to call the defeat of the United States an agreement and considers the news about the negotiations spread by the Americans to be attempts to manipulate the markets. We must admit that there is some truth in this. 15 minutes before Donald Trump posted on social media about the ban on bombing Iran’s energy infrastructure due to allegedly productive negotiations, an abnormally high volume of trading in Brent and WTI futures was recorded.
Democrats call it corruption. The White House rejects the accusations because they are unsubstantiated. But everything indicates that Tehran is right after all. He holds the threads of this armed conflict in his hands.
The response list of five conditions is an unbearable burden for Donald Trump. According to an insider in the Wall Street Journal, the US president wants not only joint control over the Strait of Hormuz, but also counts on a portion of Iranian oil. The sides are so far apart that there is no question of ending the war. No matter how much the White House threatens to wipe out a country of more than 90 million from the face of the earth if it does not negotiate.
The conflict is likely to drag on for more than the 5-6 weeks expected by the United States. The closure of the Strait of Hormuz costs the global economy 10 million bpd, and the oil and gas importing countries are the first to experience pain. Following the drop in the European PMI to its lowest level in 10 months, the figures for German business climate indicators disappointed.
In such a situation, Christine Lagarde’s stated willingness of the ECB to act decisively and persistently if inflation deviates significantly from the target is more evil for the euro than good. The weakness of the eurozone’s energy-dependent economy will be exacerbated by higher interest rates. In this regard, Morgan Stanley’s statement that the US dollar will soon fall due to divergence in monetary policy looks erroneous.
