Obama hoses down talk of Israeli strikes against Iran

ISRAEL'S Foreign Minister was headed for Washington overnight amid signs that the US and its Middle East ally hold diverging views on how best to resolve the standoff over Iran's disputed nuclear program.

By InvestSMART · 7 Feb 2012

By InvestSMART ·
7 Feb 2012

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The visit comes as US President Barack Obama seemingly contradicted his Defence Secretary, Leon Panetta, saying he did not believe Israel was committed to a pre-emptive strike on Iran's nuclear facilities.

Mr Panetta, according to US news reports, expects unilateral Israeli action as soon as April, a view given weight by Israel's Defence Minister, Ehud Barak, who last week warned that a window was fast closing for a successful strike.

Fearing that Iran would move its uranium enrichment and nuclear facilities deep underground, Mr Barak said the program was about "to enter an immunity zone".

"If [economic and other] sanctions don't achieve their goal of halting Iran's nuclear weapons program, there will arise the need of weighing an operation," he told a conference in Herzliya, outside Tel Aviv.

Mr Obama said on Sunday that he did not believe Israel had committed to such action and said the two governments were working to solve the crisis, "hopefully diplomatically".

"I don't think that Israel has made a decision on what they need to do," he said in an interview with NBC, highlights of which were screened during the Super Bowl on Sunday night.

Israeli Foreign Minister Avigdor Lieberman plans to discuss the recent European Union decision to ban Iranian oil imports from July 1 and freeze assets of its central bank and other entities, according to a Foreign Ministry official quoted anonymously by Bloomberg.

The talks precede a visit to Washington by Prime Minister Benjamin Netanyahu early next month, when he is due to address the annual conference of the American Israel Public Affairs Committee.

Mr Obama did not say whether the US could expect early warning from Israel about a strike, saying only that the two nations shared the closest military and intelligence ties ever in their history and would proceed "in lockstep . . . to try to solve this".

"Any kind of additional military activity inside the [Persian] Gulf is disruptive and has a big effect on us," Mr Obama warned during the interview.

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Frequently Asked Questions about this Article…

How could talk of an Israeli strike on Iran affect oil prices and market volatility?

The article notes growing tension around Iran’s nuclear program and an EU decision to ban Iranian oil imports from July 1. Coupled with warnings that any additional military activity in the Persian Gulf is “disruptive” and has a big effect on the US, these factors could tighten oil supply and increase oil price volatility, which in turn can drive broader market volatility for everyday investors.

What do recent US and Israeli comments say about the likelihood of a pre-emptive strike on Iran?

Views are mixed: US Defense Secretary Leon Panetta reportedly expects possible unilateral Israeli action as soon as April, while Israel’s Defence Minister Ehud Barak warned a window for a successful strike is closing. President Obama, however, said he did not believe Israel had committed to a pre-emptive strike and stressed efforts to solve the crisis diplomatically. That divergence means the likelihood remains uncertain.

What impact could the EU ban on Iranian oil and asset freezes have for investors?

The article says the EU decided to ban Iranian oil imports from July 1 and freeze assets of Iran’s central bank and other entities. Those measures could reduce Iranian oil exports and constrain Iran’s financial flexibility, potentially tightening global energy markets and raising geopolitical risk — both factors investors should watch for their effect on energy prices and market sentiment.

Could military activity in the Persian Gulf disrupt US markets?

Yes. The article quotes President Obama warning that any additional military activity inside the Persian Gulf is disruptive and has a big effect on the US. Disruption in the Gulf can affect oil shipping routes, energy supply expectations and investor confidence, all of which can influence US markets.

What specific signals should investors monitor to judge escalation risk between Israel and Iran?

Based on the article, investors should monitor high-level statements from US and Israeli officials (for example Panetta, Barak and Obama), diplomatic visits (Israel’s foreign minister to Washington and Prime Minister Netanyahu’s upcoming US visit and AIPAC address), official sanction implementation dates like the July 1 EU oil ban, and reports about Iran moving enrichment facilities underground.

How do US–Israel military and intelligence ties affect the chances of a surprise strike and market reactions?

The article says the two nations share their closest military and intelligence ties in history and would proceed “in lockstep” to try to solve the crisis. That close coordination could reduce the likelihood of a completely unexpected attack, but public divergence in statements can still increase uncertainty and prompt market reactions.

Why is Israel concerned Iran might move uranium enrichment underground, and what could that mean for markets?

Israel’s Defence Minister warned Iran could move enrichment and nuclear facilities deep underground, entering an “immunity zone” that would make a successful strike harder. If true, that could shorten the perceived window for military options, heighten geopolitical risk and contribute to greater market and oil-price volatility.

Given the developments in the article, what practical items should everyday investors keep an eye on in the near term?

Watch for: (1) official timelines and statements about potential Israeli action (mentions of April in the article), (2) implementation dates and details of sanctions such as the EU’s July 1 oil ban and asset freezes, (3) diplomatic visits and speeches (Israeli foreign minister, Prime Minister Netanyahu’s US visit and AIPAC address), and (4) any reports of increased military activity in the Persian Gulf — all of which the article highlights as drivers of geopolitical and market risk.