No panic moves

As expected, Iran parliament decided to close Hormuz. In a Theocracy, this is understood as god’s will, transmitted to the Ayatolah and approved by the parliament, which from the west is seen as fanatic behavior. Now what? First, Putin was asked yesterday if he was going to help Iran and mentioned that 15% of Israel population is of russian descent, lowering the odds of a Russian intervention. China has been quiet, other than asking to form a UN council to stop escalation. But Iran has also threatened to exit the Non proliferation treaty (NTP). To leave, Iran must invoke Article X, provide a 3‑month entry notice to other treaty members and the UN Security Council, and base the decision on “extraordinary events that jeopardize its supreme interests”. India, Pakistan and Israel never joined the NTP and posses nuclear weapons. North Korea joined in ‘85 but withdrew in ‘03 and nothing happened. But this is starting to look very similar to the episode with Irak and WMDs, where unclear (or simply false) intelligence was used to force a regime change. Perhaps because we’ve seen this movie before, equity markets are flat, bond yields are up and the dollar is a little stronger. Oil is modestly up. No panic moves. No escalation discounted.

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