Posted: Jan. 07th 2020
This evening news is breaking that Iran has responded to the recent targeted killing of Major General Qasem Soleimani. Initial reports indicate that Iran has launched approximately a dozen ballistic missiles at two United States military bases in Iraq. The missiles were launched from Iran, and the country’s Revolutionary Guard has claimed responsibility for the attack.
This event marks a major escalation in the conflict between the two countries. The fact that the attack was launched from Iran and the country’s military has explicitly taken responsibility for the attack is extremely important. Iran wanted to send a clear message to the United States about the recent killing of Soleimani. The message in Iran’s eyes was so important it by-passed its customary means of working through proxies and providing itself a method of distancing itself from their activities.
Iran has now placed the proverbial ball firmly back into President Trump’s court. After President Trump’s recent threats to the Iranian government via Twitter, should he fail to respond he risks being seen (in the eyes of some) as weak. On the other hand, should President Trump retaliate to Iran’s response to the killing of Soleimani the cycle of escalation will continue to gain momentum. In short, President Trump has left himself few palatable routes forward. The world will be watching closely at the next move by the United States and the Trump administration.
As expected, crude oil prices jumped on the news. However, it is important to note that Iran’s response this evening did not target shipping through the Strait of Hormuz or the critical oil infrastructure of its neighbors – it was pointedly directed at the military installations and personnel of the United States. Accordingly, this response by itself will have little to no impact on the supply of oil from the region. The markets, however, are reacting to the growing fear that the escalating cycle of retaliation between the countries will eventually spiral out of control. In short, the risk of further destabilization in the region has expanded significantly this evening.
It is impossible to project how the Trump administration will respond to tonight’s events. Consistency of approach and messaging has not been a hallmark of the current occupier of the White House. As we stated last week the killing of Soleimani will have significant and long-lasting consequences. Tonight, we are just starting to witness these consequences unfold.