WAR OF DRONES
The prevailing sentiment leans bullish on oil, yet it's crucial to recognize this as a form of economic warfare. The real Achilles' heel for Iran lies in the repercussions of plummeting oil prices.
In the intricate geopolitical landscape of the Middle East, each move sets off a chain reaction of strategic responses. Israel's recent airstrike on Tehran's diplomatic compound in Syria epitomizes this dynamic. Iran swiftly retaliated with an unprecedented display of force, deploying over 300 drones, cruise missiles, and ballistic missiles. However, Israel's anti-missile shield managed to contain this attack.
The aftermath of the April 1 attack saw a senior Iranian general and six other officers from the Islamic Revolutionary Guard Corps lose their lives, leaving the building in ruins. Israel's calculated swiftness, notifying the Biden administration mere minutes before the strike, underscores the agility and stealth of its strategic maneuvers.
The ramifications of this clash extend far beyond the physical destruction and loss of life. While Israel asserts that the target was a direct threat to its security, other reports suggest it housed the consular affairs section of the Iranian embassy, complicating the narrative. Moreover, Iran's steadfast support for the Assad regime in Syria adds layers of complexity to the situation.
Over the years, Israel's repeated attacks on Iranian facilities have claimed the lives of several Revolutionary Guard officers, prompting Iran to fortify its operational security and confine leadership meetings to diplomatic premises to forestall future assaults.
Zooming out to the broader strategic landscape, the conflict in Gaza emerges as a significant catalyst for regional dynamics. With tens of thousands of Palestinian civilian casualties and millions more plunged into a humanitarian crisis, the Arab states find themselves relegated to secondary roles. Turkey's attempts to leverage its relationships with both sides have faltered, while even the United States has been unable to quell the violence, exacerbating tensions in the U.S.-Israel relationship.
The Middle East now resembles a battleground between Iran and Israel, a natural consequence of the region's trajectory over the past two decades. The aftermath of the U.S. invasion of Iraq and the Arab Spring uprisings destabilized autocratic regimes, setting the stage for a power struggle between Tehran and jihadist groups. Iranian proxies in Yemen, Syria, and Iraq have positioned themselves to strike Israel from multiple directions, further complicating the situation.
Israel's diminishing international support for its Gaza campaign has emboldened Iran, potentially driving Israel to counter Iran's encirclement strategy with increasingly aggressive moves. Yet, the geographical distance between the two adversaries, coupled with more immediate threats, makes a prolonged war improbable. Israel's focus on Gaza, coupled with domestic unrest and diversionary tactics by Hezbollah and the Houthis, further dilutes the likelihood of sustained conflict.
For Iran, proxies in the Arab world offer a means to avoid direct military confrontation, given its own domestic challenges. The aging leadership of Supreme Leader Ayatollah Ali Khamenei adds a layer of uncertainty, while dwindling global support for Israel's actions plays into Iran's favor.
Despite the precarious balance of power, the risk of miscalculation looms large. As tensions escalate and the region teeters on the brink of further escalation, diplomacy and dialogue are imperative. With the potential for catastrophic consequences, all parties must urgently seek a peaceful, negotiated resolution before it's too late.
Treasuries Vs GOLD
Treasuries appear to be an insufficient hedge against geopolitical risk, whereas gold stands out as a reliable alternative.
The VIX appears relatively low compared to gold.
OIL
The prevailing sentiment leans bullish on oil, yet it's crucial to recognize this as a form of economic warfare. The real Achilles' heel for Iran lies in the repercussions of plummeting oil prices. With record-breaking US shale oil production and Saudi Arabia ramping up its output, these elements could emerge as the most formidable weapons in this geopolitical struggle.
Guillermo Valencia A
Co-founder of Macrowise
April 14th , 2024
Ciudad de México