Global Political Drivers: Look to Iraq

  • The key to understanding the ‘Soleimani crisis’ – both causes and consequences – lies in Iraq.
  • Although the US and Iran have remained locked in tense confrontation since 2018, the driver here is not these two antagonists’ strategies but the recent breakdown of the Iraqi political system.
  • The risk of a third Gulf War hinges on Iraq becoming an unavoidable battlefield as a result of that country descending further into chaos.
  • For in that event, the US and Iran would be dragged into conflict even if, as may be the case, their present conscious intention is to avoid war.
  • Conflict on Iraqi territory would be a wildfire that could set the Middle East ablaze.
  • No plausible Iranian retaliatory action in other theatres would have the same potential to trigger an oil price shock strong enough to hit the global economy and financial markets.
  • This conclusion assumes – and here is our one other confident prediction alongside our core judgment about Iraq as the decisive theatre – that Iran will not try to close the Hormuz strait.
  • The possible positive case for Iraq would see patriotic leaders stabilizing the country: if so, the present crisis would recede.
  • It is not yet possible to predict which way Iraq will go with any degree of confidence: but the global market-negative possibility of the country collapsing seems no mere tail risk.

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