The Purim War - Part 6, Cracks in the Home Front*

Although America’s blockade of the Persian Gulf is working causing oil storage problems in Iran, an implosion of its economy and a collapse of its currency, severe cracks in the home front have emerged. The 60-day clock of the War Powers Act has run out, and President Trump’s approval rating, with gas prices up nearly 50%, has declined to 37%, according to the latest poll. Indeed, beyond the wackos on the Right and the Left who are rooting for Iran, it seems that voices of the liberal establishment are implicitly supporting an Iranian victory. Why? Their hatred of Trump overwhelms all considerations of America’s security interests in the middle east region.

 

So, where do we go from here? Trump’s novel interpretation of the War Powers Act arguing that direct fighting between the U.S. and Iran ceased in early April, means that should hostilities resume a new 60-day clock would start. The ball is now in Congress’ court, but I would note Congress did nothing in 2011 when President Obama engaged in hostilities in Libya for six months. Further, every president since Nixon have has stated that the act is unconstitutional; it looks like we will once again be headed to the Supreme Court on the issue of executive power.

 

Meantime, Trump, and Chinese leader Xi are scheduled to meet in less than two weeks. This meeting has been postponed before, and it may yet be postponed again. Nevertheless, my guess is that meeting or no meeting, Trump will execute the new military plan to attack Iran’s infrastructure as a means to coerce Iran to yield on its nuclear program.

 

Beneath the surface the dynamics of the middle east are changing before us. The UAE is leaving OPEC and there seems to be a budding alliance between the UAE and Israel. Israeli troops are on the ground in the UAE to assist in its first ever deployment of its iron dome air defense system outside of the country.  Thus, it would be a foreign policy blunder of the first order for the U.S. to fail to achieve its fundamental war aims.

* See: Shulmaven: The Purim War- Part 5, Deadlock in the Strait of Hormuz*

The Purim War- Part 5, Deadlock in the Strait of Hormuz*

With the Iranians continuing to prevent shipping from leaving the Persian Gulf and the American Navy blockading the entrance to the Strait of Hormuz, it looks like fighting will resume after the ceasefire ends on Wednesday. To be sure the U.S. delegation is now enroute to Islamabad to negotiate; it remains to be seen if the Iranians will show up. Further it is not clear whether or not the Iranian team can bind the Revolutionary Guard (IRGC) to accept any terms they agree to. From the outside it looks like there is a division between the political and military factions of the government.

 

As we noted last week it is untenable for the U.S to accept Iranian control of the Persian Gulf and for Iran to maintain its uranium enrichment program. ( See: Shulmaven: "Millions for defense, but not one cent for tribute" ) Thus unless there is a change of heart on the part of the IRGC, a resumption in the fighting seems inevitable. A harbinger of that occurred today with the U.S. seizing an Iranian flagged ship in the Indian Ocean. Indeed, should the fighting resume, it will be taken to a more destructive level than we have seen thus far.

 

Thus, the party goers in Friday’s financial markets are likely to suffer a hangover when trading resumes on Monday.

 

*-See: Shulmaven: The Purim War - Part 4, The Ceasefire Fog*