Judgement Call

The Commander-in-Chief of the most powerful army in the world was being briefed about a different kind of card game. Some of his advisers, all people he had chosen for their loyalty and dedication to himself, mumbled that they were not too hot on that idea.

That particular player was a bit of an unknown and would have the advantage of the venue. But Bibi was insistent. Bibi claimed to know that player inside out, he had a “solid plan”, it would be a “very short game”.

Someone suggested bringing friends along, just in case. Bibi objected. There were actually not many real friends, they were weak, and why share the glory? This would be his defining moment. With Maduro, people might forget or forgive Ukraine. The Nobel was back in sight after that.

And Bibi, so confident, said he would go alone anyway. Reassuring.

Not someone to share the limelight nor potential glory, knowing how to ace that game, he finally announced to his strategically cautious team “I just want to go.”

Per the plan, they quickly took many face cards off the hand of the opponent. He would surely fold quickly.

Somehow, he kept finding new cards, faceless cards to boot. Gosh, he had a plan, having long expected exactly that particular encounter.

Four weeks and Bibi and Friend are still at it, bruised by-standers pressuring to end the game quickly.

Newly invited “allies” refused to join such a complicated and increasingly desperate, if not illegal, game.

It’s now his turn, he is left with only 2 cards.

Some tell him to play his powerful War card. Bibi’s War card is already down. That’s all Bibi’s got, War cards.

Dropping that card would surely drag them all into a very costly, unpredictable chaos, with many terrible casualties, human, economic and financial, some maybe hurting longer term, like right through November.

Is he strong enough? Can he really bring this strange player on his knees?

Why is he playing that game, far away from home where he’s got so many other important things to do? He understands how crucial this next move is. He warned his friends at home: “If we lose the mid-terms, they will impeach me.”

This strange, actually not so well known guy can also bluff. Darn!

But is he really bluffing? “How can he bluff me, he’s got no cards, at least none that I can see?” Is he bluffing?

The fact is that this still faceless player is wagering his existence, with a well thought out plan, and a hidden number of War cards.

If he’s not bluffing and his own War card is not enough, how could he still claim victory?

Others say he should play safe and use his Diplomacy card instead. He’s also good at that, his more cautious advisers smartly tell him.

He already has his two “experts” trying to find an off-ramp with Pakistan, Turkey and others, some merely angling for future considerations.

At this point, he clearly would prefer to play Diplomacy, much less costly for everybody, isn’t it?

China would help, right?

But the faceless guy is tough, confident and very demanding.

Can he find a way to leave the game without anybody saying he folded?

Maybe he could get his Gulf business friends to play along. He could cease fire and task them to design some kind of a “Peace Plan” between themselves, the GCCs, Iran, Irak, Syria, Kuwait and Turkey.

After all, it’s their problem! He does not need them, does he?

He would be the power broker, tying them all together into an enlarged, more realistic Gulf Cooperation Council. Shia or Sunni, they’re all Muslims after all.

He’s a transactional guy. Let’s make a deal, dammit!

Winning with the War card looks scarily iffy, and tremendously costly, any which way one looks at it.

Not winning with the War card would be a US-made geopolitical catastrophe and, importantly, terminal for him and his legacy.

If he plays the Diplomacy card, suddenly morphing into a peace broker, he hands the game to the locals, does his best to mediate fair rules, then heads back home to mind simpler businesses.

Not losing is winning, no?

He would surely look smart, genius in fact, seemingly having planned it all.

What’s the alternative? War cards forever.

Oh! Forgot Bibi!

***

Back to reality, one might think one found the edge here: Trump the peace broker. Rationality timely popping out from chaos.

But what are the odds?

• The odds that he will understand the cost/benefit of all this? A true judgement call.

• The odds that he will not succumb to the warmongers, including Bibi and some GCCs imploring him to “finish the job”?

• The odds that someone around him has enough experience and wisdom to objectively advise him? Who among his survivor staff and generals are strong enough to tell him the truth and objectively set the odds.

• The odds that a Kissinger, a Brzezinski, a Kennan, an Acheson or a Baker will suddenly emerge from this White House? True, all deep state people, unlike Rubio, Hegseth, Witkoff, Kushner and Miller. BTW, how’s the Ukraine war going? How’s the tariff war going? How’s the immigration war going?

• The odds that, if he actually plays Diplomacy, nobody will try to sabotage the process?

Two outcomes, one with potentially catastrophic consequences vs one with potentially very positive implications. Call it Binary Poker.

As an investor, I am supposed to handicap and bet on this “game”. What I know of Trump:

• He has not always done the smartest thing in my book. Poor judgement.

• He’s impulsive.

• He can backtrack, smartly if not elegantly.

• He is very sensitive to financial markets.

• He understands the importance of the midterms, particularly for himself.

• He often goes more with the gut, less with the head.

• But his ego, his bravado. Dangerous combo.

• His team is rather weak, inexperienced in things not money or real estate.

Big judgement call!

The S&P 500 lost 9.0% since its Jan. 28 peak of 7002, half its constituents are in correction of 10%+. Bonds are down 5.7%. The war is very unpopular. Inflation is back, particularly on essentials. Seven months to November.

Is it enough to counteract Bibi, others like the Saudis, Rubio, even the WSJ Editorial Board?

What’s the downside?

Statistically and statically:

• The S&P 500 is 4% below its 200dma. Corrections often take it down 5-10%. That would be roughly 6000-6300 or another 1-6% decline.

• In bear markets: -15-20% to 5300-5700 or another 10-17% as Ed Yardeni illustrates:

• On forward EPS, a correction would bring the P/E to 18.6-19.6, still above its LT median (17.4).

• A bear market would bring the P/E to 16.5-17.7. A recent bargain but not a bear market bargain.

Statically?

Are forward earnings of $322, up 17% from trailing EPS, reasonable in the context of a prolonged, deeper war?

Higher inflation, interest rates, negative wealth effect, dangerous when the unwealthy are already contracting.

Using trailing earnings of $275.38 provides no comfort:

Judgement call! Particularly for those of us managing our own, or friends and family, money focused on absolute, not relative, returns.

A call on his judgement.

How lucky do you feel?

***

Back to our regular programs

What Are Trump’s War Options Now?

In this YouTube video, 

Colonel Douglas MacGregor, former senior advisor to the Secretary of Defense under President Trump, warns that Iran holds a strategic advantage in the ongoing conflict with the United States. He predicts a massive offensive after the five-day ceasefire ends[extended by 10 days to April 6], involving airstrikes and attempts to seize Persian Gulf islands like Karg.

MacGregor dismisses the island seizure strategy as ‘World War II thinking’ unsuitable for 21st-century warfare dominated by precision strikes and surveillance. He states Iran’s ISR strike capability gives them the upper hand, making light infantry operations ‘suicidal’.

He argues that killing Iranian commanders has likely brought up ‘younger, more innovative’ leadership, and that global economic pressures from the conflict work in Iran’s favour. MacGregor believes Trump seeks a massive conventional assault to force Iran’s surrender, but doubts it will succeed.

The Gulf Is Divided and Sees Dark Times Ahead ‘We want a guarantee that this will never happen again.’ U.A.E. presses for a conclusive outcome to the war.

(…) The United Arab Emirates, which bore the brunt of Iranian missile and drone attacks, holds no illusions about a negotiated settlement with the current Iranian regime, which is increasingly dominated by the Islamic Revolutionary Guard Corps. The focus should be not on reaching a cease-fire, but on a “conclusive outcome” that addresses the full range of Iranian threats to the region, from nuclear to missiles to proxy militias, U.A.E. officials say. (…)

An Iranian regime that remains under IRGC control is no longer acceptable, Noura Al Kaabi, a minister of state for foreign affairs said. “We want to have a normal neighbor,” she said. “Do we want to get a generation that is used to being threatened by our neighbors? I don’t think this is a reality that we want to leave to our next generations. We want a guarantee that this will never happen again.”

To be sure, not all the Gulf nations have similar determination. Oman’s foreign minister Badr Albusaidi described Iranian strikes on cities like Dubai, Manama and Doha as “the only rational option” in response to the U.S. and Israeli bombing campaign. Oman was the only one of the six Gulf monarchies that refused to sign this week’s joint statement condemning attacks by Iran and its proxies.

Qatar, which hadn’t been targeted by Iran for several days until an intercepted salvo on Friday, and is now reopening schools, has signed the statement but adopted markedly more conciliatory language toward Tehran. The Qatari prime minister’s adviser, Majed Al Ansari, said Tuesday that Iran will remain a neighbor and therefore a way to coexist must be found, making it important to find a negotiated solution.

Still, the biggest Gulf states—Saudi Arabia and the U.A.E—as well as Kuwait and Bahrain are becoming increasingly hawkish. While Saudi officials refrain from public statements, they have made it clear that they view the IRGC-dominated Iranian regime as an existential threat to the kingdom, diplomats say.

“All the Gulf countries agree that this war is unnecessary,” said Althunayyan of Kuwait University. “But the divergence that we are seeing is that the strategic patience of some of these countries is diminishing by the minute. And if the Iranian aggression intensifies, these states will have no option but to confront the threat, neutralize it and re-establish deterrence.”

Iran has already pledged to hit power plants, water desalination facilities and oil installations across the Gulf should the U.S. target its electric generation infrastructure, as Trump pledged last weekend before announcing a five-day delay for diplomacy, a deadline that he extended by 10 days on Thursday.

The Iranian regime also threatened massive retaliation against the Gulf should the U.S. military—perhaps with the assistance of some Gulf states—seek to seize Iranian islands in the Gulf and near the Strait of Hormuz. The U.A.E. claims sovereignty over the islands of Abu Musa, the Greater and the Lesser Tunb that Iran took over in 1971. The Pentagon is considering sending some 10,000 ground troops to the region, in addition to the 5,000 soldiers and Marines already dispatched to the Gulf in recent days.

“There is no doubt that the region is entering a phase of uncertainty regarding its future,” said Sultan Mohammed Al Nuaimi, director-general of the Emirates Center for Strategic Studies and Research, a think tank in Abu Dhabi. “The trajectory appears to be either a move toward further military escalation, recently reiterated by President Trump, or a continuation of difficult negotiations unlikely to achieve their intended outcomes.” (…)

On March 26, Steven A. Cook wrote in the Council on Foreign Relations:

(…) Joining the United States and Israel in the fight against Iran would invite additional Iranian retaliation and potentially more damage to civilian, energy, and military infrastructure. And in the case of the Saudis, it would put Crown Prince Mohammed bin Salman in the politically awkward position of fighting alongside Israel. (…)

The Gulf states now have to contend with managing a radically destabilized regional environment. If the Islamic regime in Iran does not fall—and so far, it has proved to be resilient—the GCC states will need time to harden their defenses. The billions in resources it will take to protect Dubai, Abu Dhabi, Doha, and Riyadh will detract from their plans for domestic economic change and regional integration.

Regional tension will also drive military spending, especially in air defense capabilities. The Gulf countries will also likely draw even closer to the United States to help ensure their safety and security.

It is almost certain that the rapprochement between the Gulf states and Iran is over, but for Saudis, Emiratis, and others to achieve their domestic goals, they need more than that. Iran cannot be able to threaten its neighbors and sow chaos in the region. But, even after four weeks of military operations against the Islamic Republic, that goal does not seem to be at hand.

On March 27, Jim Krane wrote The Iran War and the End of the US-Gulf “Oil for Security” Deal

(…) What happens to oil-for-security when the fighting stops? Before the war, the US security umbrella was already fraying. The United States failed to prevent the September 2025 Israeli strike on Doha or the September 2019 Iranian strike on Saudi Aramco’s Abqaiq facility.

Under the Trump administration, the US security force in the Gulf has transitioned from protector of trade to instigator of war. As a result, US military bases in the Gulf are now Iran’s key targets.

When calm returns, Gulf countries will face a difficult reassessment of the growing risks of relying on US security provision.

On March 27, Dr. Ranjan Solomon wrote in the Middle East Monitor (my emphasis):

(…) Post the Iran war, the Gulf Cooperation Council (GCC) faces an urgent need for a new regional security architecture, shifting from reliance on US protection to an inclusive “cooperative security model.” This structure would likely incorporate Iran and Iraq to prevent future conflicts, moving beyond the current defensive, fragmented posture toward a collective, stable, and locally-driven equilibrium.

Instead of deepening rifts, the new arrangement would prioritize a, new arrangement between the GCC states and Iran to ensure regional stability, with an, inclusion of Iran and Iraq in a new structure. The war has highlighted the risks of relying on US-Israel protection, prompting, GCC states to reconsider their security dependence. With, oil infrastructure and regional stability threatened by direct attacks, the focus is shifting to, protecting Gulf investments and preventing further conflict.

While Riyadh stands to gain from a weakened Iran, the potential for an Iranian state collapse or fragmentation poses a massive threat to regional stability.

A Gulf Cooperation Council (GCC) without U.S. and Israeli dominance would likely shift toward a security architecture rooted in regional integration, featuring normalized ties with Iran, reduced reliance on foreign military bases, and increased strategic autonomy.

This shift would accelerate a pivot toward Eastern powers like China and Russia for trade and diplomatic partnerships. Gulf states would pivot from reliance on U.S. security guarantees toward regional security arrangements, potentially including frameworks with Iran to manage regional disputes. A major reduction or removal of U.S. military infrastructure – long considered targets by Iran – would likely occur, fundamentally altering the GCC’s defense profile.

GCC sovereign wealth funds might pivot from Western investments toward domestic development, infrastructure projects, and partnerships with Asian, Russian, or Chinese initiatives. The pursuit of normalizing ties with Israel, as seen in the Abraham Accords, would likely freeze or reverse, as GCC nations re-prioritize Arab and Islamic world alignment. The GCC might experience fewer retaliatory attacks from regional actors who currently target US-backed infrastructure.

The GCC could emerge as a more independent geopolitical actor, rather than one involved in or impacted by conflicts that are seen as foreign-driven. (…)

The growing role of Russia and China contributes to a more multipolar Middle East, where GCC countries leverage relationships with multiple global powers to meet economic diversification goals, such as Saudi Vision 2030, and security

In the final reckoning, this war has exposed the limits of power when confronted with resolve. Iran has demonstrated that endurance, geography, and strategic patience can outweigh brute force, forcing its adversaries into uneasy calculations of exit rather than victory. The United States and Israel may still command formidable arsenals, but their political will is fraying under the weight of an unwinnable confrontation.

What now emerges is not merely a military stalemate, but a shifting world order where regional actors reclaim agency. If there is a lesson here, it is stark: domination is no longer assured, and dignity, once asserted, can redraw the map of power itself.

This other video discusses Iran’s proposed GCC Security Alliance:

Iran Offers Security Alliance To Gulf Neighbours, Says Ready For Peace But Not Israel

Here’s what the IRCG said, verbatim:

Now is the time to return to our roots. We Muslims must return to the word of Allah, the Holy Quran. “Do not take them as allies until they emigrate in the way of Allah. If they return, seize them wherever you find them and kill them. And do not take any allies or helpers from among them.

(…) As an Islamic nation, with the strength of a well-established civilization and a world united by Islamic principles and the Quran, we must stand on our own feet to ensure our own future and the happiness of future generations.

O Muslim brothers, we do not need a state thousands of kilometers away from us to ensure our regional security. We do not need a state that, in its own words, sees Islamic countries as milch cows. We do not need a state that sees the security and interests of Israel as its first and last concern and sacrifices all other countries for it. We do not need a state that sees Muslims as worthless creatures whose land has nothing but resources, oil and gas.

What good has America done you? If you were to face aggression from the Israeli entity, would the Americans fire a single shot in your defense? As Muslims, we still remember well how fragile the alliances were on the one hand and the lack of a permanent force with strategic depth on the other hand led to the Arab defeat of the occupying power in the 1967-1973 war.

(…) Therefore, for the sake of logic, it is necessary to seek a comprehensive security union under a structured system. We should unite by ensuring our security and move towards a joint security agreement based on the citations of Islam and the Quran, which will be a solid foundation. (…)

“The Islamic Republic has announced its readiness to establish a regional military-security union without the US-Israeli presence. (…)

• Gulf Countries’ Frustration With the US Grows as War Wears On

Gulf countries are increasingly frustrated with the US over the Iran war, privately questioning American security guarantees and expressing concern about the Trump administration’s apparent lack of strategy, according to people familiar with the matter.

One month into the US-Israeli conflict with Iran that they spent a year lobbying against, Gulf states continue to come under Iranian attack, with Saudi Arabia on Friday intercepting half a dozen drones and two Kuwaiti ports being struck. That’s as the Strait of Hormuz — a vital shipping corridor that’s an economic lifeline for the region — remains nearly shuttered, causing billions of dollars of losses in oil revenue.

Many officials are questioning US President Donald Trump’s rationale, commitment and aims for the war, and the value of hosting American bases that have made their countries targets, said the people, who requested anonymity to discuss sensitive matters.

Still, wary of angering Trump, none have voiced those concerns publicly, and there’s little prospect of them asking the US military to abandon its bases. (…)

Many Gulf officials fear Trump will cut a deal with Tehran that doesn’t curb its production of ballistic missiles or support for proxy militant groups such as Hezbollah and Hamas, the people said. They believe that outcome is possible so that Trump can declare victory and pull out of a war that’s unpopular in the US and has driven up energy prices around the world.

In such a scenario, the Gulf states fear they would be left to deal with an embittered Iran that maintains some kind of control over the Hormuz strait, the people said. (…)

One key frustration, said some of the people, is that their concern about Iran’s retaliation in the event of war was shrugged off by the US. Washington, they said, gave more weight to Israel’s arguments. (…)

In addition, Gulf officials were upset over a US decision to temporarily suspend sanctions on a trove of Iranian oil — potentially worth over $10 billion — on the seas in tankers. That move was to help lower surging crude prices but came with Gulf Arab states unable to get most of their own petroleum exported because of Iran’s threats against vessels sailing through Hormuz. (…)

Now, as thousands of drones and missiles fly over Gulf Arab cities that are meant to be havens for tourists and financial investors in a volatile region, some governments are talking about doing more to diversify their geopolitical relationships beyond the US and forging even stronger ties with China, the people said.

Beijing wouldn’t provide a security guarantee, but neither has the US, and its pitch over the past year as the more predictable superpower is gaining traction, the people said.

From various other sources:

• The Gulf states now have to contend with managing a radically destabilized regional environment. If the Islamic regime in Iran does not fall—and so far, it has proved to be resilient—the GCC states will need time to harden their defenses. The billions in resources it will take to protect Dubai, Abu Dhabi, Doha, and Riyadh will detract from their plans for domestic economic change and regional integration. Regional tension will also drive military spending, especially in air defense capabilities. The Gulf countries will also likely draw even closer to the United States to help ensure their safety and security.
• The closure of Hormuz demonstrates that the Gulf is one of the world’s main resource regions, touching nearly every life on the planet. Access to the Strait should therefore be maintained by all, but it requires political stability to function. If just one of its eight stewards (Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE) is sufficiently aggrieved, it is now painfully apparent that that country can block the other seven from supplying the world, and from being supplied in return.
• Widespread opposition to the US-Israeli war on Iran may provide more shippers and governments a rationale to consider the Iranian option. Like the Gaza war that prompted the Houthi attacks, the US-Israeli war on Iran is exceedingly unpopular. Only in Israel do surveys show public support for the war at over 50 percent. In the United States, the war is the least popular of all US wars at their outset. International willingness to stand up to the Trump administration also appears to be gathering pace; governments may be pushed by urgent economic pressures to make the case for a different approach to Iran.
• As is often the case in warfare, the weaker combatant benefits from asymmetry. The task of forcibly reopening the Strait and protecting 100 transits a day is orders of magnitude more difficult than Iran’s tactics of making threats, laying mines, and launching inexpensive kamikaze drones that only occasionally hit their targets. Many observers believe that forcing open Hormuz would require a US ground invasion. Even then, Iran has other options for escalating its retaliation: Halting desalination and electricity production in US-allied Gulf Arab countries, blocking the Bab al-Mandab and Saudi oil flows to Asia, striking Hormuz bypass pipelines, or destroying further valuable and complex oil and gas export infrastructure.

EARNINGS WATCH

Trailing EPS are now $275.38, down $0.16 from the end of February and up 9.9% YoY vs +12.4% in February.

Remarkably, forward 12-m EPS jumped $7.43 (2.4%) to $322.20, up 19.9% YoY.

Actually, since December 31, 2025, trailing (actual) EPS increased 2.9% while forward (estimated) EPS have been raised 7.4%.

Looking at 2026 estimates, EPS growth has been revised up from 15.6% end of December to 18.8% with the largest increases in IT but also in Energy (from +7.8% to +12.8%) and Materials (+20.9% to +28.5%).

Since 1984, the correlation between PPI-Commodities and Headline CPI is 73%.

The inflation correlation chart below is particularly revealing. Commodities sit at the top with a strong positive relationship to changes in consumer prices, followed by natural resource companies and infrastructure.

Source: Carson Investment Research, Morningstar 

When commodity prices rise for a long enough period, consumer prices get impacted. If this is what we get from this war, we could be in for a period of rising inflation, already well above the Fed’s target.

Earnings multiples would decline from rising interest rates and from investors expectations that the economy will slow down, on its own or with the Fed’s help.

Ed Yardeni:

While Israel is playing Whac-A-Mullah, the US is trying to find someone in Iran’s regime with whom to negotiate a peace plan. (…)

No wonder investors went into fetal positions last week. The good news is that sentiment is getting very bearish, which is bullish from a contrarian perspective. However, the fog of war will have to lift for the stock market to move higher. (…)

Bond Vigilantes around the world are responding to the oil-price shock and the worsening outlook for many government budget deficits, as defense spending will undoubtedly increase. (…)

Financials continue to weaken, a potentially ominous sign as this sector tends to lead the broader economy. (…)

The private credit market’s liquidity crisis continues. (…)

Despite the typical pattern of estimates drifting lower as reporting dates approach, analysts have continued to nudge numbers higher for Q2-2026 through Q4-2026. The war is being ignored almost entirely except for last week’s minor decline in the Q1-2026 estimate. That won’t likely continue if the Strait remains closed into Q2 earnings season.

Best of luck. Judgement day coming soon enough.

“As per Iranian Government request, please let this statement serve to represent that I am pausing the period of Energy Plant destruction by 10 Days to Monday, April 6, 2026, at 8 P.M., Eastern Time,” Trump said on his Truth Social platform.

“Talks are ongoing and, despite erroneous statements to the contrary by the Fake News Media, and others, they are going very well.”

“I gave them a 10-day period, they asked for seven.”

“In a certain sense, we have already won.”

Iran Hasn’t Requested Pause on Energy-Site Strikes, Mediators Say

Iran hasn’t requested a 10-day pause on strikes on its energy plants and is yet to deliver a final response to a 15-point plan to end the war, peace talk mediators said.

President Trump said earlier Thursday he was pausing strikes on Iran’s energy sector for 10 more days, to April 6, so peace negotiations can take place. Trump’s previous deadline was Friday. He said the extension was at Iran’s request.

Iranian officials have told the mediators that they are interested in negotiations but the country’s leadership is yet to weigh in and give a final decision, the mediators said.

The U.S. has offered a 15-point plan that essentially would swap an end to crippling sanctions for Iranian concessions on every point of conflict between the two sides, including its nuclear and missile programs and support for regional militias.

Iranian officials already have demanded that the U.S. scale its excessive demands outlined in the 15-point plan before it agrees to meet to discuss a potential cease-fire, the mediators said.

They also ruled out discussing Iran’s missile program as a starting point to the talks and doesn’t want to commit to ending enrichment of uranium forever, they added.

The odds of success for a cease-fire remain low, with Iran and the U.S. staking out maximalist demands that are unacceptable to the other side, the mediators said.

• Saudi Arabia urging US to keep up Iran attacks, intelligence source confirms Crown Prince Mohammed bin Salman said to view US-Israeli war as ‘historic opportunity’ to remake Middle East

Saudi Arabia has urged the US to ramp up attacks on Iran, a Saudi intelligence source has confirmed, while it is weighing a decision on whether to join the fight directly.

The Saudi source confirmed reporting in the New York Times, which said the kingdom’s de facto leader, Crown Prince Mohammed bin Salman, has urged Donald Trump not to cut short his war against Iran, and that the US-Israeli campaign represented a “historic opportunity” to remake the Middle East.

The intelligence source said Riyadh was not just calling for the military campaign to be continued, but to be intensified. Trump appeared to confirm the report about the crown prince’s role, telling journalists on Tuesday: “Yeah, he’s a warrior. He’s fighting with us.”

There are no reports of active Saudi military involvement in the nearly four-week-old war so far, but a Saudi political analyst said the kingdom was likely to take that step if current peace efforts led by Pakistan failed.

“What matters now is Iran’s decision,” Mohammed Alhamed, a Saudi geopolitical analyst, said. “If Iran engages seriously, there is still a path to contain escalation. If it rejects the conditions and continues its attacks, the threshold for Saudi action will be crossed.” (…)

Saudi Arabia’s ability to transport its oil exports by pipeline to the Red Sea has meant it is not as vulnerable as its neighbours to Iran’s tactic of imposing a near-total blockade on oil tanker shipments leaving the Gulf through the strait of Hormuz. The attack on Yanbu signalled an Iranian warning that it could also threaten that economic lifeline.

That threat would be multiplied if Iran’s allies in Yemen, the Houthi movement, joined the war with its own missile arsenal.

“I believe that Saudi Arabia still maintains cautious neutrality in the Iran-Israel-US war,” Hesham Alghannam, a Saudi defence expert told Agence France-Presse. But he added: “If the Houthis strike Saudi assets, Riyadh may shift toward defensive coalition support or limited retaliation.”

Saudi Arabia and Iran, claiming leadership roles of the Sunni and Shia Islamic worlds respectively, have long been regional rivals. According to a leaked US state department cable, the crown prince’s paternal uncle King Abdullah urged the US military in 2008 to “cut off the head of the snake”, a reference to the theocratic regime in Tehran. (…)

The policy was don’t start the war, but if you start it, finish the job,” (…)

The crown prince solidified his hold on power by cultivating a close relationship with Trump, but will now have to rethink Saudi reliance on the US for its security, observers have argued.

“MBS [Mohammed bin Salman] has lost the bet on all his investments over the last several years,” Ellie Geranmayeh, senior policy fellow at the European Council on Foreign Relations said. “He financially invested in Trump and Trump’s family and his corporation and his White House, but at the end of the day the views of the Saudis and of the whole Gulf have been sidelined by the wishes of Benjamin Netanyahu.”

Prince Mohammed had begun to recalibrate his position after a missile attack on a Saudi oil facility in 2019, which Riyadh blamed on Iran. The US, under the first Trump presidency, offered verbal support but did not carry out the reprisals the Saudis were demanding.

Four years later, Saudi Arabia tried detente by signing a surprise agreement with Iran to restore mutual diplomatic relations, a deal brokered by China.

“After the US refused to come to their defence, the Saudis pivoted to hug Iran close, in the hope it wouldn’t lash out against them in a conflict,” Geranmayeh said. “Now the war has started and MBS lost the bet that Iran wouldn’t retaliate, he has reportedly urged the US to end the Iranian threat once and for all. So Saudi Arabia is now facing the conundrum of whether to get more involved.”

The United Arab Emirates has seen its oil exports comprehensively blocked and has openly called for a decisive military defeat of Iran. The UAE ambassador to Washington, Yousef Al Otaiba, wrote in the Wall Street Journal on Wednesday: “A simple ceasefire isn’t enough. We need a conclusive outcome that addresses Iran’s full range of threats.” (…)

The WSJ Editorial Board also urges to “finish the job”:

Don’t Let Iran’s Hostage-Takers Win Stopping the war weeks short would vindicate their Hormuz strategy.

• Official from mediating country: Trump leaning toward ground invasion, convinced Iran will then capitulate

An official from one of the countries mediating between the US and Iran tells The Times of Israel that US President Donald Trump appears to be leaning toward ordering a US ground operation against Iran, with Washington convinced Tehran will buckle under such military pressure.

The official intimately familiar with the mediation efforts says the US privately recognizes that Iran is not likely to agree to the concessions presented in Washington’s 15-point plan and has dispatched thousands of troops to the region in order to capture Tehran’s Kharg Island on Trump’s orders.

A second official from a mediating country warns that while the US may be able to capture the island, holding onto it for an extended period of time will require many more soldiers and an extended period of fighting — far beyond the four-to-six week window that Washington has told the public that the war would last. While Saturday will be the four-week mark, the US still claims to be well ahead of schedule.

Both officials from mediating countries say that the Islamic Republic is not likely to capitulate, regardless of whether a ground operation moves ahead.

They insist that Iran will not agree to terms now that it wasn’t willing to accept before the US launched the war.

• Pentagon Weighs Sending 10,000 More Ground Troops to the Middle East

Meanwhile:

• Economists See War Pushing US Inflation Above 3%, Hurting Growth

The personal consumption expenditures price index is now seen rising 3.1% on average this year, compared a prior estimate of 2.6%, according to the latest Bloomberg monthly survey of economists. While that’s primarily due to higher oil prices, forecasters also expect another metric that strips out food and energy costs to advance more than previously estimated.

Economists see a more limited impact on gross domestic product — projecting growth to average 2.3% this year, softer than the prior estimate of 2.5%. The latest downgrade to GDP estimates partly reflects tamer consumer spending in the first half amid uninspiring job creation.

Respondents also pushed out their forecasts for Federal Reserve interest-rate cuts, with the first reduction now seen in September. (…)

Economists in the Bloomberg survey raised the odds of a US recession in the next 12 months to 30% from 25% previously, the survey showed. They cut their forecasts for average monthly job growth this year — to 43,000 from a prior projection of 70,000 — and now see the unemployment rate averaging 4.5%. (…)

• Mortgage Rates Rise for Fourth Straight Week Rates hit 6.38% Thursday, about a month after falling below 6% for the first time in years
• Europe’s Economy Starts to Feel Pain From Trump’s Iran War

(…) “It’s very clearly the energy-intensive sectors that are hurt first and foremost,” said Christian Keller, Barclays’s head of economics research. “But the longer it lasts, it will go into every sector, every input price.” (…)

The German chemical industry — hit hard by the last spike in energy costs in 2022 — has warned of output cuts with the Strait of Hormuz still effectively shut.

Production at the country’s biggest ammonia plant, SKW Piesteritz GmbH, has been scaled back to the technical minimum of 85%, while Evonik Industries, a maker of specialty chemicals, is still surveying the damage it may face. (…)

Container shipper Hapag-Lloyd AG is facing additional weekly costs of $40 million-$50 million for things like fuel, insurance and storage. The company is trying to recover some through “contingency and emergency charges,” CEO Rolf Habben Jansen said.

Such costs are threatening to cascade through the supply chain, making life more expensive for everyone. Consumers are well aware: The share of households expecting faster price growth over the next year has risen “very strongly,” France’s statistics office said. (…)

The current shock “is probably beyond what we can imagine at the moment,” Christine Lagarde said in an Economist podcast released Thursday. This “leads to a sort of a delayed assessment of how serious this current crisis is.” (…)

• The global food crisis unleashed by the war From Minnesota to Punjab, fertiliser costs are up and harvests are set to be hit

Germany Drafts Plan to Hit US Companies in Next Trump Clash

The next time Donald Trump tries to push America’s traditional allies into line, the German government intends to be better prepared.

Officials in Berlin have started mapping vulnerabilities in US supply chains to identify points where Germany and its European Union partners could apply pressure, according to people familiar with the effort. Their goal is to create a consensus among EU nations on how they can use their leverage, if and when they get drawn into another dispute with the White House.

The initial findings suggest ways to target the massive US tech firms with close ties to the White House, the officials said. Other options could aim for the AI investment boom that has helped to drive US stocks to record highs this year or push up drug prices for American voters, an issue the president has already shown he’s sensitive to.

“By sticking together, Europeans can prove to Trump that they are prepared to match him,” said Tobias Gehrke, an expert on economic statecraft at the European Council of Foreign Relations. “If Europe can credibly demonstrate that intimidation tactics don’t work, this could, over time, weaken those forces in Washington that support Trump.”

The German exercise is part of an urgent European effort to build a geopolitical framework to manage the increasing hostility of the US and the growing power of China. Yet it’s also a process that is fraught with jeopardy: across the EU, senior officials are painfully aware of how exposed their companies would be should reprisals with the US spiral out of control.

The officials cautioned that no decisions have been taken on activating the plans and their preferred outcome is to rebuild relations with the White House. (…)

“There will be no going back to the way things were,” German President Frank-Walter Steinmeier said Tuesday. “The rift is too deep.” (…)

New taxes, fines or operational constraints on Alphabet Inc., Amazon.com Inc. or Meta Platforms Inc. could deliver a meaningful economic hit to profits and, in the Digital Services Act and Digital Markets Act, the EU already has legislation on the books that would allow it to target US tech firms, according to Antonio Barroso, a senior geo-economics analyst at Bloomberg Economics.

Another pressure point lies in supply chains running artificial intelligence. US companies — from OpenAI and Anthropic to Microsoft Corp.’s AI units and Elon Musk’s X ventures — depend in part on European industrial inputs for their data center rollout, according to analysis by German officials. Those components include specialized equipment from firms like Siemens AG, the officials said. (…)

Export controls would prove to be even more painful weapons against the US, the German officials said. Washington remains reliant on European firms for chemicals used in semiconductor manufacturing and Dutch firm ASML and its German suppliers, Zeiss and Trumpf, produce advanced lithography machines essential for cutting-edge chip production. (…)

European companies supply the active ingredients for nearly half of all brand-name drugs sold in the US and 90% of the insulin that Americans use every day, according to the American Chamber of Commerce in Brussels. They also provide over a third of chemical imports that help to supply a range of US industries.

Drilling down into the details of the global supply chain, the Chamber of Commerce identified almost 300 different categories where US firms rely on European suppliers for 100% of their imports. There are more than 700 where the reliance is 90% or more.

The EU is the largest source of foreign direct investment in the US. While governments can’t dictate where European firms choose to allocate their capital, they could adjust regulatory frameworks or withdraw export incentives to steer European money away from the US market. The previous government in Berlin used similar tools in an effort to curb the amount of FDI heading to China. (…)

German officials are also looking at the role that European military bases play in the US’s ability to project power around the world, the people said, and their value has been highlighted during the strikes on Iran. The Chamber of Commerce estimates that it would cost the US $100-$200 billion a year to fill that gap if it wasn’t in NATO. (…)

“This is not about confrontation, but about mutually defining our interests,” German Defense Minister Boris Pistorius said last week, when asked about Berlin looking to exploit US pressure points. “The fact that things are not always 100% aligned is true in every marriage, whether good or bad.”

China to establish nationwide long-term care insurance system

China on Wednesday issued a set of guidelines to accelerate the establishment of a nationwide long-term care insurance system, with the aim of addressing the basic care needs of people who have difficulty in taking care of themselves.

The long-term care insurance system is a form of social insurance designed to provide services or financial support for basic living care and related medical services to individuals who are unable to care for themselves, according to the guidelines issued by the general offices of the Central Committee of the Communist Party of China and the State Council. (…)

This system is considered a vital component of China’s broader social security framework and a crucial strategy to tackle challenges posed by the country’s aging population, the document noted.

“The Present”

“They’re gonna make a deal. They did something yesterday that was amazing, actually. They gave us a present, and the present arrived today, and it was a very big present worth a tremendous amount of money,” Trump said.

“I’m not going to tell you what the present is, but it was a very significant … prize,” he said. “It wasn’t nuclear-related. It was oil- and gas-related, and it was a very nice thing they did. But what it showed me is that we’re dealing with the right people.”

“They said, ‘To show you the fact that we’re real and solid and we’re there, we’re going to let you have eight boats of oil … and they’ll sail up tomorrow,’” Trump said during a Cabinet meeting, referring to Iran.

He added: “They then apologized for something they said, and they said, ‘We’re going to send two more boats.’ And [it] ended up being 10 boats.”

“And I said, well, I guess they were right, and they were real, and I think they were Pakistani-flagged. And I said, well, I guess we’re dealing with the right people,” he said.