USA lose patience with Iran. Joint military operation with Israel and UAE?
It is informally speculated that soldiers from the United Arab Emirates could participate in a military operation under the aegis of the USA and Israel.
Actions aimed at Iran are becoming increasingly likely after it becomes clear that the regime in Tehran has no intention of any peace talks with Americans.
Donald Trump admitted he is increasingly irritated by the situation, and "the clock is ticking against Iran".
Media reported that the US president considered an attack this weekend, but it did not occur due to the return of the delegation from the summit in China.
This seems to indicate that a war scenario is quite likely already by next Saturday, unless a diplomatic breakthrough occurs (e.g., Chinese involvement in talks with Americans, who remain passive and the Trump‑Xi summit changed little).
For markets, a clear escalation scenario could mean one thing – further rises in oil prices and increased inflationary pressure in the largest economies.
This is clearly seen in debt markets, where we see further increases in yields.
In Japan, they were intensified by reports of Prime Minister Takaichi’s government plans to increase the stimulus package.
This could be an additional argument for a weakening yen, unless the local authorities decide on some intervention (a pointless move if a few days later there were actually an escalation in the Middle East).
In the currency space, the mentioned yen is the weakest. The rest of the majors, however, are reflecting against the dollar, and the pound is the strongest. Markets are still analyzing the political situation in the UK – we have reports that Prime Minister Starmer will present a scenario of his resignation and a vote for a new Labour Party leader, where a clash is likely between the “pro‑EU” Wes Streeting and the “eurosceptic” Manchester mayor (Burnham).
In the macro calendar we are after the release of weak macro data from China overnight, and Monday’s schedule is relatively sparse.
At 16:00 we will see US real estate market data (NAHB index), and at 22:00 data on capital inflows to the US. Thus, speculation around Iran will be more important.
In the coming days, FED statements and NVIDIA results will also be key for the market – all on Wednesday.
EURUSD – is it just a short-term reaction?
The EURUSD pair is trying to react in line with the dollar’s pullback against other currencies on Monday. Markets are taking a breath, but the future does not look good.
Unless diplomatic arrangements are made at the "summit", i.e., greater Chinese involvement in the peace process in the Middle East, or a US and allies attack on Iran next weekend, it could be quite likely, and that would mean a strong risk‑off hit, i.e., a noticeably stronger dollar.
Daily EURUSD chart
Technically strong resistance, where supply may already be more active around 1.1650‑65, meaning the space for a bounce is small.
In the coming days we may see a test around 1.15 and further 1.1410 (March lows), if geopolitics dominates the markets.
