Under Pressure

Ceasefire or (abysmal) escalation? (Free)

I am going to start this week with a short entry explaining the two rather extreme endgames remaining in the Iran-Israel (the U.S.) conflict. Please note that after this week, my daily entries will take a break of 2-3 weeks. I’ll explain more later in the week.

So, the U.S. struck Iran, but with conventional weapons, allegedly using Tomahawk cruise missiles and 14 GBU-57A/B Massive Ordnance Penetrators (MOPs) dropped at Fordow and Natanz nuclear sites. The view of analysts on the success of strikes is highly conflicting, with some, quoted mostly by the mainstream media, announcing the destruction of the Fordow site (or both), while others show only minuscule damage. What I learned from the Iranian accounts is that there was no visible damage at either of the sites, and roads remained open near both facilities. This information came in the form of videos and reports from both Iranian journalists and ordinary people. I am thus leaning toward the option that not much was accomplished by the strikes. The U.S. also alerted Iran before the strikes, which most likely led to a wide evacuation of the centrifuges and critical staff.

I came across an interesting theory regarding why President Trump and other leading figures in his administration touted the strikes as an astounding success, with the president even posting, “Fordow is gone!” and why Iran was alerted. I will write more on the Strait of Hormuz in the coming days, but it seems that at least six supertankers have turned around before reaching the strait because of the U.S. strikes.

The theory, published by Lord Bebo, a known pro-Russian account on X, states that the negotiations in Oman between the U.S. and Iran held before the strikes would have led to a compromise where Iran and the U.S. would declare victory after the strikes and Iran would launch a “retaliation” on some abandoned U.S. base. After this, a ceasefire would be announced. This was an entertaining theory yesterday, but then Israel launched one of the heaviest attacks of this campaign, with Israeli leadership announcing that the campaign is “ongoing.” Still, this theory was so plausible that I would give it a few more days.

This is also because the options for President Trump and Israel are getting limited. While Israel inflicts damage on Iran, Iran continues to launch its missiles. Moreover, Iran keeps moving to more and more destructive (modern) missile types in accordance with the war of attrition policy they declared after the initial strikes by Israel.

I don't think Israel’s society can really cope with much death and destruction, while Iranian society has been battle-hardened and its populace really does not have a choice. The catastrophic “liberation” operations, e.g., in Libya, Iraq, and Syria, have shown them that the Western powers cannot be trusted. You can read more on the subject from here. If the Israeli economy were to collapse, many would probably emigrate (despite the travel bans). Iran has successfully enacted an “indirect” maritime blockade of Israel with Maersk’s decision to suspend their operations at the port of Haifa, which may end up seriously hurting Israel’s economy. I already wrote about the interceptor missiles on Friday. The simple fact is that Iran is built for a war of attrition, but Israel is not. This conflict has a definite time limit.

President Trump also looks to have become rather incoherent due to heavy criticism of his actions deep inside the MAGA movement. In his latest rants, he has, e.g., attacked Congressman Thomas Massie, a key figure of the MAGA movement. I know several other MAGA supporters and individuals who have turned against the president because they believe he has broken his promises. See, e.g., Congresswoman Marjorie Taylor Greene.

We did warn you, though. In the Weekly Forecasts 11/2024, we noted that

If the above are President Trump’s picks for the secretary of state and national security advisor, they carry two implications:

1. There will be a genuine push for negotiated settlement (peace) in Ukraine.

2. There will be a push for a wider war in the Middle East.

They would emphasize the policy lines we envisaged past week, and increase the likelihood of a policy/judgement error we warned about.

To add, in our January Black Swan Outlook, we were too optimistic and thought that President Trump would truly seek a negotiated peace for the conflict in the Middle East because its costs would be too high. President Trump has also already “attacked” the rising prices of oil. I would say that these illogicalities show that he is under extreme stress due to decisions he knows to be bad. I would ask again, what do Israelis have on him?

Based on the information provided, I believe we only have two options in the coming weeks: either a ceasefire or a significant escalation. You absolutely need to be prepared for the possibility of $200+ oil, and much higher natural gas prices.

Tuomas

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