One problem, of course, is that it is far from clear what those objectives are. Presumably they began with the plan to decapitate the Islamic Republic’s leadership and minimise its ability to launch long-distance missiles, and hopefully also slow its weapons-grade nuclear programme. At various points since then the objective has seemed to expand to regime change, and to contract to degrading the Republican Guard’s warfighting ability. At this point the main objective simply seems to be to reopen the Strait of Hormuz, through which a significant proportion of global fossil-fuel shipments travels.
Markets continue to respond positively to Mr Trump’s throwaway statements, even though there is ample evidence that they rarely have any connection to his subsequent actions. For example, on March 9, they soared after he told a reporter that “the war is complete, pretty much”, and then said publicly that the war would be “over pretty quickly”.
The President has two competing requirements. First, he will want to end this war on terms that appear like it was worth getting into. And second, he has to try and ensure that its impact on American consumers is politically manageable. These clash because, for example, he has to simultaneously insist that the Iranian regime has become more isolated and economically insecure as a consequence of his actions – while also ensuring that the Iranian crude oil that is already on the high seas can be sold, in order to minimise spikes in oil prices.
This also means that he will not welcome outright destruction of Iran’s energy infrastructure. Both Mr Trump and his defence secretary have said that they knew nothing about their ally Israel’s attack on the world’s largest natural-gas reserve, the South Pars field. Tel Aviv denied this claim, saying that the raid was coordinated with US forces.
These conflicting messages have essentially confused markets to the point where they are close to breaking down as information aggregators. The research firm Variant Perception said in a note on Thursday that the coming days would mark “peak uncertainty” about the war, and that gold and equities moving downwards together was a sign of panic-driven “tactical liquidation”.
I suppose it is too much to expect the efficient markets’ hypothesis to survive a world in which the future path of the world’s single-most important economic indicator, the price of a barrel of Brent crude, depends on the impulses of one extremely unpredictable individual. However, there are nevertheless some indicators that are worth watching – perhaps because they reinforce the problematic dynamic that got us into this mess in the first place. One such is spreads between Brent, which tracks North Sea oil; Murban, which follows Gulf oil; and West Texas Intermediate. On Saturday, Murban hit $146.40 a barrel, while Brent was at $112 and WTI was just above $90. As its supply lines come under pressure, the world’s most global market is fragmenting. Asian buyers will be hit harder than European, which in turn will suffer far more than American.
This gets to the heart of the perverse incentives that drive much of Mr Trump’s behaviour. He has the power to set off -- in a distant part of the world -- a war that may run countless economies aground. But, even if it hurts every global economy, it hurts the US least of all. Partly because it is insulated by distance, as it always was, but also because if the vector for economic stress is fossil-fuel prices, the US is now a beneficiary of higher prices as well as a victim. Chevron’s stock is 5-10 per cent higher since the first strikes on Iran, although the Dow Jones Industrial Average is down 7 per cent.
The US today is a unique historical problem. It has every incentive to create chaos elsewhere, since that relatively strengthens its economy at the expense of everyone else’s, while the rest of the world has no real leverage over it, either politically or economically. Over the longer term, this sort of imbalance cannot persist.
The natural response will be one of two things. Either the rest of the world consolidates itself into a more effective bloc, viewing post-Trump America as a greater danger than its own rivalries; or it identifies specific mechanisms by which it can impose costs on the US.
The first dynamic is hard to imagine, but there are some straws in the wind. A recent poll by Politico asking citizens of major Western nations whether it was better to depend upon China or Mr Trump’s America threw up some startling results. In Canada, 57 per cent went for China, as compared to 23 per cent for the US; in France, it was 34 per cent for China and 25 per cent for the US. Even in traditionally Atlanticist Britain, 42 per cent argued for Beijing, and Mr Trump’s America only got 34 per cent. It’s hard to make the case to these countries about a distant threat of possible economic coercion by China when they face a more imminent economic collapse driven by unilateral US actions.
The second seems even more difficult to picture. It is true that, for example, Japan, an oil importer deeply exposed to the Gulf crisis, has major holding of US Treasuries. Other countries have been muttering about de-dollarisation for a while. But putting these into practice will involve a painful and costly transition. But the worse that US behaviour gets, the more likely countries will be to take the risks involved in cutting it off.
 "West Asia, Israel Iran US conflict")