LIVE MARKETS-Iran has incentive to drag out war, inflating prestige and market pain, strategist says
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
IRAN HAS INCENTIVE TO DRAG OUT WAR, INFLATING PRESTIGE AND MARKET PAIN, STRATEGIST SAYS
President Trump extended the U.S. major airstrike deadline on Iranian power plants to 8 p.m. ET on Monday, April 6. That said, Israel proceeded with strikes on Iranian power infrastructure this weekend. The Houthis have joined Iran and entered the conflict, representing a dual escalation of the military conflict and the energy crisis as they will seek to limit Red Sea energy transit. Reportedly, the Pentagon is in preparation for weeks of ground operations in Iran.
"Despite having its country militarily decimated, Iran’s ability to exert control over the Strait of Hormuz has given it the global power recognition it has zealously sought since the revolution. Its leadership is now basking in the newfound glory of being recognized as a global power player," writes Mike O'Rourke, chief market strategist at JonesTrading, in a note out on Sunday.
He adds, "This coalesces with twenty-first-century war propaganda and a whole new dynamic with memes, videos and trolling. Almost every message has Xi Jinping and Vladimir Putin lined up with Iran mocking President Trump."
O'Rourke notes that a key Iranian leader the U.S. is reportedly negotiating with, Parliament Speaker Mohammad Bagher Qalibaf, trolled President Trump by indicating he is a "reverse indicator" for financial markets that should be faded.
Additionally, O'Rourke says it's been reported that China and Russia continue to provide support to Iran.
As O'Rourke sees it, Iran has clearly identified the stock market as one of the president’s key pressure points, and it's in the interest of all three nations to continue to target that pressure point, driving additional market volatility.
Obviously, the global investment community will react positively to anything that represents progress, and O'Rourke would expect a ceasefire agreement to be that first step.
However, he believes it's in Iran’s interest to slowly engage, delaying progress as long as possible, which means the longer that Iran can maintain the status quo, the more it can inflate the prestige of its newfound power recognition and attack President Trump’s pressure points, and push for better terms.
"That will be intolerable to other Gulf nations, like Saudi Arabia; they can’t allow Iran to exit this war with more global influence than it had prior to the conflict. It is remarkable that officials are speaking confidently in terms of weeks considering the infinite number of uncertain variables at play," O'Rourke writes.
Meanwhile, on Monday, President Trump again warned Iran to open the Strait of Hormuz or risk U.S. attacks on its oil wells and power plants.
(Terence Gabriel)
EARLIER ON LIVE MARKETS:
BOUNCE DAY? STOCKS START THE WEEK WITH MODEST GAINS CLICK HERE
DOW IN CORRECTION: CAN FIBONACCI SUPPORT SPARK A REVERSAL? CLICK HERE
MINING STOCKS: MS SEES ROOM FOR RE-RATING DESPITE ENERGY SHOCK CLICK HERE
LUXURY: UBS SAYS EVEN SMALL BEATS MAY POP CLICK HERE
S&P 500 CORRECTION CLOSE TO ENDING - MORGAN STANLEY CLICK HERE
ENERGY AND RENEWABLES SUPPORT THE STOXX CLICK HERE
BEFORE THE BELL: EUROPEAN FUTURES SOFT; INWIT, ALUMINIUM STOCKS WATCHED CLICK HERE
IT'S A SAD STRAIT OF AFFAIRS AS OIL SOARS CLICK HERE
