In a context of persistent tensions in the Middle East, Iranian President Ebrahim Raisi and Foreign Minister confirmed dead Monday after a helicopter crash. The officials' shocking disappearance casts further doubt on investors in a region already gripped by economic upheaval, with supply chain uncertainties fueling metals prices to a record high this week.
Within Iran's borders, the president's death sparked mixed reactions, ranging from public mourning to open celebrations, reflecting deepening regional divisions. Attempts to make predictions about the country's economic and political future are further obscured by gaps in the government's leadership succession plan. Raïssi held several important positions within the government which must now be occupied by voters who turn to them. in record numbers.
The US diplomatic response has been non-committal, adopting neither a reassuring nor an aggressive stance. Although the State Department quickly offered public condolences, the White House initially remained “unusually quiet,” reflecting what some call a “wider failure to define a clear policy and vision for the future of the Middle East.” On Tuesday, White House national security spokesman John Kirby recognized the “atrocious human rights (violations) in (Raissi's) own country” while offering “official condolences, where appropriate” and promising to “stand with the Iranian people in their fight for their own civil rights.”
The White House's delayed response suggests that current tensions between the United States and Iran are not easing. From a market perspective, this means there will be no relief from economic sanctions imposed by the Biden administration. affected more than 600 people and entities, including Iran and its proxies. Such sanctions lead to an increase in domestic prices and promote diplomatic tensions which encourage increase in military spendingand therefore higher public deficits.
The results: vigorous and persistent inflation and a progressively weakening dollar.
The markets have already taken note. Among base metals, investors are banking on a tightening of supply chains, already strained under the weight of strong consumer demand. The prices of aluminum and copper, both among the Iran's main exports– reached new heights this week. Copper prices jumped to $5.17 per pound, supported by expectations of shortage and growing industrial use with the continued development of electric vehicles, renewable energy and artificial intelligence.
“Frankly, we don't produce enough copper, and yet there are buyers everywhere for copper right now. » John LaForge, head of real assets strategy at Wells Fargo, told The Morning Brief. His remarks came before the accident, which is expected to put additional downward pressure on copper supplies depending on how quickly Iran's economy recovers.
Concerns over the safety of oil and gasoline imports from the Middle East could further boost the production and purchase of electric vehicles, contributing to even greater demand for components such as copper and metals from rare earth.
Although Iran is neither a major exporter nor importer of gold, prices of the precious metal also hit new records this week as investors turn to the safe-haven commodity amid a crisis. growing global economic uncertainty. Fed rate cuts helped propel gold price at $2.450 even though Raisi's death remained a rumor, breaking previous records as the markets once again proved to be successful prophets.
By Peter Schiff last year: “Everything that happens there with Israel, we will… finance it. It's going to increase our deficits, more fiscal stimulus that is inflationary, and that's going to lead to larger deficits and more money printing…”
Then as now, gold prices were rising in response to conflicts in the Middle East and Ukraine, with investors predicting increasingly harmful economic policies.
“All of this is just accelerating the problem today,” Schiff said of the U.S. monetary response at the time. “…The stakes are high and the implications are serious. »
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