Another proxy war

The U.S. is at war with Iran. Reports of the death of Iran supreme leader Khamenei, might shorten the conflict, but it’s not clear if this is a precise short term attack similar to the one in Venezuela or a conflict that will require the U.S. military to deploy boots in the ground, and consequently, a long and costly conflict. What’s the goal? It appears to be another proxy war between the US and China, whereby American are trying to hit chinese choke points: Venezuela and Iran were oil providers to China at favorable prices, and China was, in turn, providing money and weapons to them, or so we are told. Because of nuclear weapons, behemoths don’t enter into direct confrontation, but use allied countries of their enemies to invade, change regimes or sanction their economies. And it seems to be working so far. The US will come back to the trade negotiating table with China, knowing they have greatly diminished their oil supply, increasing Russian dependency, which at the same time depends on the U.S. to end the Ukraine conflict. As you can see in the chart below, 76% of the oil that flows through the strait of Hormuz goes to Asia, mostly China. The conflict needed to happen now, before the midterms, and at the same time the Epstein files are flooding social networks. The American public used to welcome a military action by their president for years. But the public sensitivity to wars may be fading, as they keep wondering “what’s in it for me?”. The domestic economic reality is more important than another conflict in the Middle East. If oil rises because of this attack, it can have a bitter aftertaste. And the crucial component is time: Xi has no pressure, since he’s not subject to elections (although might be subject to coups) but Trump only has 2 years left as president, and a prolongued conflict will hurt his agenda for the second half. Wars are very expensive, and historically they have taken down empires, starting with their currencies. Markets continue to be numb to these events, in the sense they’re not falling, but the US is severely underperforming this year to international markets, and commodities are waking up, after years of hibernation. The long term consequences of these actions don’t look great for the U.S. and the West.

Want to know more? You can register for free at Fund@mental.

#iamfundamental #soyfundamental #wealthmanagement #familyoffice #financialadvisor #financialplanning #policymistake #ratecut #stagflation