There is a breathlessness to news and market drivers at present, and it is hard to keep up. Be it the daily swing in trade relations between the United States and China which started off at the weekend ugly, turned conciliatory Monday and back to ugly again yesterday. Or the much welcome sight of a ceasefire in Gaza giving an ease in anxiety only to once again, and inevitably, be threatened, this time by Israeli bodies not being returned coupled with Israeli Prime Minister Benjamin Netanyahu saying in an overnight interview with CBS, “Hamas must give up its arms and demilitarize, or all hell breaks loose." Stir in a split government in Japan and the unseemly events in Paris where Prime Minister after Prime Minister needs resign because the occupant of the Élysée Palace, one Emmanuel Macron, refuses to both change the parameters of policy and accept his being the main barrier for France to extricate itself from financial mire, investors do not know where the next political haymaker might come from.

There is some relief for the investment suite from the Fed Chair. Jerome Powell opened with his usual prompt on how rate alterations would be taken meeting-on-meeting, however, he did allude to the US economy being on a strong footing and that there may be an end in sight of the Fed’s rundown of its balance sheet which has immediately been roundly welcomed as ‘dovish’. The trouble is, and there is always trouble with oil at present, whatever succour the wider community gleaned from an idea of an easing FED, it did not migrate to oil. Surplus is on the mind, and such narrative gained an ally once again from the IEA monthly report. Briefly, and to pick the tone, the IEA saw volume of oil on water rising by 102mb, global supply to rise over this calendar year by 3mbpd from 2.7mbpd, world oil demand growth reducing to 710kbpd from 740kbpd in 2025 with an eye catching view on how global oil supply was up by 5.6mbpd compared with that of a year ago. The outlook into 2026 was described as 'subdued’ and once again the divergence from the rosier outlook from OPEC’s monthly report is stark.

Knock off Gaza, knock off Iran and then what?

It is slightly disingenuous for the US take all the plaudits for the long-awaited and life-saving ceasefire between Israel and Hamas, as is the delusional claim by the UK’s Prime Minister, Keir Starmer of being a key player in the outcome. The quiet work undertaken by geographical neighbours cannot be underestimated, one only need look at the measured response shown by Qatar after Israel’s IDF bombed Hamas leaders in Doha. But like a centre-forward in football, it takes a good striker to kick the ball into the back of the net after all the assists from the wingmen. Frankly, it showcases how the US remains the singular superpower, and it is hard to pick another country having either the credentials or muscle to see it through, therefore, Mr Trump does deserve an enormous amount of recognition by staking and finishing this horrendous poker game of slaughter. 

While the US President basked in the glory of being the Gaza fixer, his speech to the Israeli Knesset, in which he repeatedly referred to Israel’s military victory as being ‘complete’, might be construed as a multifunctional olive branch. Firstly, by using such language in the seat of Israeli power, his words aim to re-establish authority over a Benjamin Netanyahu who seemed to have forged a path of beggar the consequences knowing the US will have to, however reluctantly, run as guarantor to the retribution meted out by Tel Aviv on Hamas and its allies. Secondly, it assures worried Arab states on how the US will not walk away from the ceasefire by putting a cork back in on Israel’s flask of aggression. Lastly, Mr Trump appealed directly to Tehran by saying Washington was ready for peace, "Iran, we are ready when you are, and it will be the best decision Iran has ever made.” 

It is hard to envisage how such words would be received by the likes of Supreme Leader, Ayatollah Ali Khamenei or President Masoud Pezeshkian, particularly after the bombing campaign initiated by Israel and ultimately finished by the US in order to destroy Iran’s nuclear capability. The trouble with holding a violated grudge is it precludes what seems to be a dose of diplomatic realism breaking out across the Middle East. Indeed, there is no recalling of a time when Iran has been so isolated after Israel systematically beheaded those allies that once acted as Iran’s hydra in Lebanon, Syria, Iraq and of course Gaza, with only the Houthi group offering any effectual military resistance. Pout all it likes, as seen by the Foreign Minister over the weekend declaring the Abraham Accords as being incompatible with the ideals of Iran, and dismissing the idea that it would establish diplomatic ties with Israel as “wishful thinking”, belligerence does not answer the building economic questions of a failing economy.

Given the history of Afghanistan and Iraq, a military campaign by a US-led coalition into Iran would be utter folly. The vacuum and carnage created by the ill-thought out and mismanaged invasions of 2001 and 2003 would be as gentle zephyrs compared with the maelstrom if such an attempt were undertaken in Iran. However, Tehran is weak, it can no longer justify the huge proportion of government spending on propping up proxies or indeed its own military which has been found very much wanting when faced with the war machines of Israel and Uncle Sam. The economy jumps from crisis to crisis as high inflation, slower growth, currency devaluation are compounded by arguably self-inflicted regional strife and sanctions. Now that the sanctions ‘snapback’ has been triggered by France, Germany and the UK (E3), the domestic economy and political pressure on the regime may give little choice for Iran other than to bow to the overtures of President Trump or face a very ugly mood in the populace that grows ever-tired of an oppressive Islamic regime holding on to power by intimidation, violence and oppression. 

The only major income for Tehran’s exchequer is the clandestine oil business relationship it has with China. Yet, no matter how disguised or how much volume is making its way to Shandong and other refinery areas, the very state of oil prices and the discounts that must be offered to secure Chinese custom must mean foreign exchange income is drawing down. Iran has no friends left, and with other Muslim countries such as Turkey and Indonesia being invited to make up part of the peace keeping force in Gaza, Iran’s clerics will find it hard to qualify statements of crusade-like attempts at the overthrow of Islam. Whether or not Iran adopts a siege mentality toward what some see as an inevitable deal with the US will continue to create oil price considerations. Given the ability of oil from the Americas and increased OPEC+ production to fill in any shortfall, Iran’s 1-1.5mbpd exports are not exactly game changing. But they are much easier targeted than Russia’s outflows and their geopolitical influence, be they trade or price wise, manageable, particularly with Iran’s newfound loneliness and the current prices of crude oil. And if the Trump-found success in Gaza spreads to Iran? Well, it can only mean a free pumping Iran will have a China not needing so much Russian oil and so on, and so forth. All very fey, but in a world of flow-charting possibilities and extraordinary developments in geopolitics, such whimsies might just be made reality.

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