Iran’s TACO lesson

Trump’s story about positive contacts with Iran about ending the war, firmly denied by them, is Trump chickening out. The markets’ response simply forced his hand.

President Trump would have been woken at six in the morning on Monday to be informed that his 48-hour ultimatum to Iran was creating panic in European bond markets which in turn was undermining equities. From his previous TACOs, markets are obviously important to Trump, but this time Treasury Secretary Bessant would have been particularly alarmed. As a former hedge fund trader, he would have been aware not only of the destruction higher bond yields would do to his debt management programme, but also of the difficulties faced by other G7 nations: in particular the UK, France, Germany, and Japan all of whose 10-year government bond yields were close to or making new post-covid highs.

There was only one answer: TACO.

While Iran was fighting a strategic military war rather well, their leaders have uncovered real economic power, not just over their neighbours in the Gulf, but over the American Satan as well — but they probably knew that already. They are now exploiting this particular form of psychological control over President Trump.

Iran has demonstrated an unexpectedly sophisticated level of strategic thinking and planning, taking the US-Israeli partnership by surprise. It is Iran that will determine when the bombing ends, not Trump.