After being attacked by Iran, and despite Trump's demand not to retaliate, the Israeli air force is bombing military targets in Iran as USA stays out.
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- The cold war between Israel and Iran has erupted into hot kinetic action again after Israel attacked a Hezbollah target in Beirut, Lebanon yesterday. Iran used this as a pretext to attack Israel with ballistic missiles despite its ceasefire with the USA. Trump responded in three ways:
- Claiming he didn't know about Israel's attack on Beirut (certainly a lie) and saying he "wasn't happy with it".
- Openly demanding Israel not to retaliate. Israel has clearly refused this demand.
- Saying that he is still hoping for a deal with Iran to be agreed within days, and that the USA is not a party to the Israeli military action.
- It seems likely that this new round of fighting between Israel and Iran will last at least a few days. Israel is attacking military targets and a petrochemical plant, while Iran continues its usual policy of hybrid attacks on military facilities and civilian residential areas. Energy facilities seem to be avoided, notably by Israel, probably at Trump's request. The Houthis have joined the war from Yemen, while Hezbollah in Lebanon so far has not.
- President Trump made a strong public demand last night for Israel not to retaliate, which Israel refused. Amazingly, even now, Trump is chasing an imminent "deal" with Iran and is more or less taking Iran's side over the ceasefire applying to Lebanon, despite Vice-President Vance making it clear when the ceasefire was agreed in April that it did not apply to Lebanon. Overall, the USA is taking pains to say it is not part of the re-erupted war, with Trump even praising the bravery of Mojtada Khameini, after killing his father in February! I believe the deal will not happen and Iran's main purposes is in making Trump look foolish and desperate. This will likely have major implications for crude oil and stock markets when the penny finally drops that there is no deal to be had.
- Despite the dramatic developments in the Middle East, US stock indices may have found a bottom. Asian indices traded sharply lower. Friday's drop was caused mostly by unexpectedly strong US jobs data. The rises today are not indicative of anything and are nothing to get excited about - we could easily see stocks continue to fall lower.
- Friday's strong US jobs data pushed the greenback to a near 2-month high price. Goldman Sachs is now forecasting there will be no rate cuts in the USA before 2027. In the Forex market now, since today's Tokyo open, the Dollar remains strong, although the New Zealand Dollar has been the strongest major currency while the Swiss Franc has been the weakest. The USD/JPY currency pair is close to making a new long-term high price and will be closely watched by traders today.
- Crude Oil has risen by almost 5% since trading started today on the news that Israel and Iran are back at war. The Trump administration will be concerned that it does not rise much higher.
- Crypto looks weak, with Bitcoin falling to reach a new 1.5-year low near $60k over the weekend before regaining some ground yesterday. We may see some long-term buying here from investors who believe in Bitcoin, but I would prefer short trades in this condition.
- There are no high-impact data releases scheduled for today.
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