Last chance diplomatic talks start with Iran this weekend as US aircraft carriers arrive in the region
Diplomatic talks billed by President Obama as the ‘last chance’ for a settlement of the dispute between the international community and Iran over its nuclear program will start this weekend, while at the same time the US navy is flagging the arrival of its longest vessel the USS Abraham Lincoln in the Gulf of Aden, the second giant US aircraft carrier now stationed in the region.
Under severe pressure from economic sanctions from America, Australia and the European Union, Iran has agreed to resume talks. But Iran has angrily rejected as pre-conditions a statement of steps that the international community now requires before it will consider lifting sanctions.
Talk pre-conditions
According to The Daily Telegraph today these demands include closure of the Fordow nuclear facility, a halt to the production of near weapons-grade uranium and the shipping abroad of all nuclear fuel enriched to this level.
The subtext is clearly that if no agreement can be reached then military action will follow, one way or another. Forbes magazine and other right-wing commentators are expecting a military strike to come from Israel this summer.
The current edition of the ArabianMoney newsletter discusses in depth the investment implications as distinct from the politics and economics of this issue which are fully discussed in other media
Market reaction
We envisage a spike in oil prices that would be very damaging for global financial markets, whatever is done with strategic reserves to cope with the situation, and much higher precious metal prices.
There would also be a panic out of GCC equities in response though ArabianMoney sees this as a buying opportunity because the dangers in war scenarios are always greatly exaggerated. We recall the market low that preceeded the invasion of Iraq in March 2003 while nothing actually subsequently happened in the Gulf States.
It could be different this time but we think Iran would direct its response back at the source it came from rather than look for targets elsewhere that have a formidable capacity to strike back.
Still investment at wartime lows is only for the bravest long-term investor and the more obvious panic reaction is to be expected from most people.
