US: All eyes on Iran deal decision today – Rabobank

US President Trump’s decision over the Iran deal will be made live from the White House at 2PM EST today and will be a key event for markets, according to analysts at Rabobank.

Key Quotes

“We still have no clear idea of what will be said: another grudging extension to the deal; an ambiguous response that isn’t a withdrawal but isn’t a vote of acceptance; an attempt to impose new terms on the existing deal; or an outright pull-out combined with a snap-back of sanctions on Iran. Trump confidante Rudy Giuliani has perhaps given the game away when stating that the president is still in favour of regime change in Iran: that doesn’t exactly sit alongside the current deal. Moreover, Trump has cancelled an appearance at the opening of the US embassy in Jerusalem on 14 May, and there had been suggestions that if he was going to attend that photo-shoot he wouldn’t do so against the backdrop of having just canned the Iran deal.”

“When considering the Korean angle, what is the US likely to do? Show Kim that it acts in bad face by shifting policy from one administration to the next? Or that it is not a soft touch and won’t allow a bad deal to be struck at the upcoming North Korean-US summit? Anything is still possible at this stage, perhaps, though I would suggest that Rudy knows better than me what Trump is thinking.”

“If we were to see a US pull-out and sanctions snap-back then what happens next is anyone’s guess. One of the first issues will be to work out who the sanctions will be back on—just the central bank, or all state entities?—and then to look at who is already dealing with them and would therefore be caught in the US crossfire.”

“Second will be the impact on oil prices, which actually came off from a recent peak yesterday. Is that a buy-the-rumour-sell-the-fact trade, or an insider view, or a belief that Trump won’t do anything to raise oil prices ahead of the mid-term elections? If so, once again the view is that all of geopolitics revolves around the mid-terms rather than larger strategic life-and-death issues - and perhaps they do; but wasn’t that electoral calendar also supposed to see the US make nice with China over trade? Hasn’t that worked out well so far!”

“Third will be the impact on the ground in the region where things are extremely tense. Nonetheless, we need to separate rhetoric from reality. With Lebanon’s elections now out of the way—where the Iranian proxy Hezbollah made large electoral gains (67 of 128 seats)—Tehran may no longer feel constrained over a limited military response to Israel’s recent attacks on its forces in Syria; yet Hezbollah might not want to rock a boat that is suddenly sailing in its preferred direction.”

“Moreover, if the nuclear deal is off the table and the Iranian regime feels threatened it might feel it is better to push-back against Israel in the hope of uniting the Islamic world behind it; yet Iran must know that firing missiles will not win over the EU countries that desperately want to keep doing business with it, will lead to harsh Israeli counter-strikes, and could potentially draw in both Russia and the US, creating a truly-dangerous conflagration. One other factor to consider is that Israeli PM Netanyahu is leaving the country today for a gas summit with Greek and Cypriot leaders, which either suggests no panic or no line to the White House, and then heads to Moscow on Wednesday. That meeting might be very interesting.”