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Markets learn to live with terrorism

The West would like now to enter negotiations with Iran for a better future relationship but would expect Iran to wind down its support for terrorist groups.

The West would like now to enter negotiations with Iran for a better future relationship, but would expect Iran to wind down its support for terrorist groups.

by
John Redwood

in Features

10.01.2020

The news has been dominated so far in 2020 by the conflict between Iran and the US. Donald Trump changed western policy when he arrived in the White House, regarding the nuclear agreement with Iran as unsatisfactory in its own terms whilst failing to tackle Iran's encouragement of terrorist movements and rebel forces in several Middle Eastern states. He decided to try to force a diplomatic response from Iran by stiff sanctions, particularly targeted on Iranian oil sales.

Iran countered by working through various violent groups in Syria, Iraq, Lebanon and Yemen against the US and her allies. The US President eventually responded to Iran's military provocations by killing General Soleimani, the architect of a scheme to create a crescent of supportive states to Iran through asymmetric warfare and rebel insurgencies.

Iran replied with a missile attack on US bases in Iraq which fortunately killed no-one. Markets think this should be the end of the military escalation, as the US has indicated it regards the matter as over and the moderate voices in Iran imply it has done what they thought they needed to do by means of retaliation.

Boeing crash

The confirmation from Iran that they did shoot down a Ukrainian civil airliner killing all 176 people on board by mistake was accepted calmly with great sadness by the West. This has led to more home protests against the government of Iran, where people are suffering economically from tough economic sanctions imposed by the USA and her allies, and are objecting to other repressive features of the regime. Meanwhile the Western allies who have been split on how to proceed are trying to remove differences, with the Europeans now demanding enforcement of the old nuclear agreement and the USA willing to enter wider negotiations with Iran. It looks as if the USA will not go to war with Iran, and so far Iran has kept her retaliation within limits.  

Boeing culture under scrutiny

It has not been a good week for Boeing. The growing belief that the crash was not the fault of the three-year-old Boeing 737 could not offset the bad news coming out about the culture at the plane maker over the issues of safety and performance which have grounded the newer Boeing 737-Max. The cessation of production of these planes this year owing to the continued ban on using them will make a dent in US industrial output and exports.

This year should see some recovery in economic activity as the monetary easing of late 2019 has its impact. The main governments and Central Banks want to promote more growth and get inflation up to 2% which is still a positive for shares.

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