Weekly Economic Report
In our last newsletter of 2019, we wrote about how optimism reigns as we look into 2020 with Phase One and Brexit behind us, equity markets at record highs and unemployment at record lows. Now, with the sanctioned killing of Iranian General Qassem Soleimani, a new risk has arisen which adds instability to the Middle East, and hence to oil prices and the global expansion – not to mention the risks of terrorism and war. The timing, method, location and rationale for Soleimani’s death all impact the global status quo. Iraq is currently without a Prime Minister and in the middle of significant local unrest. The same is true in Lebanon. Soleimani’s death will complicate the succession in Iran after Ayatollah Khamenei, who is eighty years old. Israel is facing a third election in less than a year. And, oh yeah, the US has an election this fall. In our view this is not a passing adventure in the Middle East with limited long-term consequence, like the failed Carter helicopter extraction in 1980 or the killing of Bin Laden. Rather, this marks a significant destabilization with widely disparate potential outcomes – like the Six Days War, the assassination of Anwar Sadat, the taking of the US Embassy in Iran in 1979 or the removal of Iranian Prime Minister Mosaddeq in 1953 to restore the Shah to his throne. It will be remembered by everyone in the Middle East and perhaps far beyond as an important event that changed the equilibrium in the region. Below we will explore how some of the important chess pieces may move on the board of Middle Eastern politics and their global economic impact.