I’m not sure what the betting odds of the US entering the war are but they’re undoubtedly very high at this point. I don’t know how Iran can even negotiate when Trump is tweeting this as well.
We will see what that brings but if you’re on the Iran side, that’s obviously an incentive to fight rather than negotiate.
The FX market is buying the US dollar on the war headlines on the flight to safety and the long end has a decent bid. The risk here is that Iran has some capability that the US and Isreal don’t know about. Considering they seem to know the location of every Iranian official, that’s doubtful.
The next question is the extent of US involvement. If it’s simply dropping a few bunker busters on a nuclear facility, then that’s not going to be a big deal. If it’s an invasion (no signs of that now) or broader attacks, then that’s a different story.
For reference, the US hasn’t achieved an unconditional surrender of an adversary at war since dropping nuclear bombs on Japan.
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