Trump: “You’ll Soon Find Out” If US Attacks Iran; Stocks Slide

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Update 2: In his clearest threat yet, President Trump replied “you’ll soon find out” when asked whether the US would attack Iran.

In remarks to the press, Trump reiterated that Iran made a “very bad” mistake, and insisted that the drone was in international waters. Though it seems like that ship has already sailed, the UN has warned the US and Iran to refrain from any actions that might “inflame the situation.”

That remark sent stocks spiraling lower as the prospect of renewed war in the Middle East weighs on markets.

Stocks

Stocks have come off their highs of the session after the S&P 500 opened at fresh record highs.

STocks

The dollar weakened on the headline while gold climbed.

Gold

The main US benchmarks have now erased nearly all of their gains from earlier in the session.

Two

If Jerome Powell has to cut rates 2-3 times to ‘offset’ the trade war with China, how many cuts will we need to counterbalance a ‘hot war’ with Iran? Whatever happens, Trump said he’s sure Powell will “do what’s right.”

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Update: After reportedly being briefed on the attack, President Trump has weighed in on Twitter to warn Iran that it made a “very big mistake” by shooting down the American drone.

The US Navy is sending ships to where debris from the downed drone is reportedly floating (in international waters, according to reports).

The US has been increasing the number of military assets in the region as tensions with Iran have flared. The USS Abraham Lincoln is stationed nearby with a full carrier strike group.

With all the tools for escalation present in the region, is it possible that we could be at war with Iran by the end of the day? Trump started what wounded like a walk-back, saying that the incident was probably a “mistake” made by an individual soldier. However, he followed that up by insisting that his  administration wasn’t pushing him toward conflict, and that, some times, it was the other way around.

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Tensions between the US and Iran flared on Thursday when the Iranian Revolutionary Guard shot down an American drone that was said to have flown into Iranian airspace (the US claims the drone flew over international territory). The drone was reportedly flying over the Strait of Hormuz – that critical chokepoint for the global oil trade – not far from where two oil tankers were recently attacked.

drone

“We will defend Iran’s airspace and maritime boundaries with all our might,” Ali Shamkhani, secretary-general for the Supreme National Security Council was quoted as saying by state-run Islamic Students’ News Agency. “It doesn’t matter which country’s aircraft cross our airspace.

IRGC Commander Hossein Salami said shooting down the drone had sent a clear and strong message for the US: Iran’s borders are ‘red lines’ and though Iran doesn’t seek war, Iran is ready for war. The US, meanwhile, denies that the drone crossed into Iran’s airspace, and says it was in international airspace the whole time.

The drone reportedly was shot down over a village called Kuhmobarak in Iran’s Hormozgan province.

Map

The news sent oil prices surging, with Brent up as much as 3%. President Trump has been briefed on the incident and the White House is “monitoring the situation.” The US military has branded the shooting “an unprovoked attack.”

The shooting follows attacks on six tankers in the region, which Iran has denied responsibility for (including the two from last week). On Wednesday, a news agency operated by Iran-backed Houthi rebels in Yemen said that the rebels had hit a power station in Jazan, Saudi Arabia, with a cruise missile, though these reports weren’t independently verified.

Numerous geopolitical experts warned that Thursday’s incident “significantly raises” the prospects for international conflict.

Particularly after the US dispatched more troops to the region last week, tensions between the US and Iran just won’t subside, with Tehran still furious over US sanctions on oil sales.  With Tehran poised to violate its agreements under the JCPOA on enriched uranium stockpiles, many are fearful that a ‘hot war’ between the US and Iran might erupt.  If it did, some of Washington’s biggest geopolitical adversaries (Russia and China) could get involved, triggering WWIII.

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