One Battle After Another

By Michael Every of Rabobank

One Battle After Another

US and Iranian negotiators meet in Geneva today to hear Tehran’s final offer but reports of what they have to say suggests we should prepare for the worst even if Iran sees a “good outlook” for today’s talks. The Kan news agency claims it will only agree to lower uranium enrichment from 60% to 3.67% for seven years, won’t hand over previously enriched material, dismantle the ballistic missile program President Trump just stated can already hit Europe and will soon be able to reach the US, and won’t stop its support for regional terror proxies.

US negotiator Witkoff, seen by critics as a soft touch, says a nuclear deal should last indefinitely while the above is a rehash of the JCPOA Trump spent years deriding (and whose backers often fail to note coincided with Iran processing uranium far beyond the agreed limits in secret underground bunkers). Indeed, VP Vance claimed there’s evidence Iran is trying to rebuild its nuclear program, which provides a US casus belli. It’s already imposed new sanctions on it.

In terms of the framing, Politico claims White House officials believe “the politics are a lot better” if Israel strikes Iran first, which would allow the admin to sell a defensive action in support of an ally. That’s unlikely to be an obstacle to action as soon as Indian PM Modi, who yesterday addressed the Knesset to stand firmly behind Israel “at this moment and beyond”, is wheels up to home later today. Also note the US Navy fleet in Bahrain has taken to sea to avoid a potential Pearl Harbor scenario, and another 12 F-22s are about to leave the UK heading east, joining 11 already there. Pay additional attention to Iran’s threat to escalate if attacked, breaking precedent not to do so regionally beyond Israel and/or token efforts: this is not the same playbook as the past.

This week also saw reported concerns an attack could involve US casualties and deplete munition stockpiles needed against contingencies in Asia. It would be a shocking error if either thought wasn’t front of mind before military pressure began: that points to underlying confidence in what the US has in store, and Iran doesn’t, or a gamble. Yet at this point the US cannot retreat without losing crucial global deterrence power: Iran is a military minnow compared to the States and any stand down would see supplies of Chinese weapons to Tehran step up so a repeat US exercise in years to come would be far more risky and/or unlikely.

In short, the US may be hoping to flip Iran into its camp via regime change. That would be a stunning geopolitical coup. Yet things could go wrong on multiple fronts, which could prove the coup de grace for much of what Trump is trying to achieve on them all.

One other thing needs to be underlined: US success would entrench Trumpism and demolish planned global alternatives; yet failure would do nothing to return ‘rules-based order’ or a benign free-trade backdrop for under-armed and over-dependent ‘middle powers’. It would instead open a Pandora’s Box of instability and volatility across geographies and sectors. As just one example, the IMEC (India-Middle East-Europe Economic Corridor) Modi fulsomely backed in Israel –which will initially involve Cyprus, Greece, and likely Italy, Bulgaria, and Romania– can hardly thrive with a destabilised or antagonised Iran at its centre. There’s a lot more for markets to think about than oil and gas, important and volatile as they are (as the Saudis boost oil output and exports for an Iran attack contingency, and Iran has ramped up oil tanker loadings for the same reason).

US-Ukraine discussions will also continue in Geneva today: it’s unclear if we will see any breakthrough there either given Russia also needs to sign off – and again note talks are happening in Europe, without Europe. Markets don’t seem to be focusing on that dynamic vs the so-called ‘Sell US’ trend, but in the long run it matters. Also note Hungary’s Orbán has deployed troops to guard energy sites over an alleged Ukraine threat to them.

It’s hardly quiet elsewhere: Cuba sunk a US vessel that had strayed into its waters, killing four Americans; Afghanistan threatened Pakistan and accused the latter of supporting ISIS; and UK PM Starmer’s controversial Chagos deal descended into chaos, with a minister telling MPs the process has been paused, then No 10 and the Foreign Office saying it’s still proceeding.

In geoeconomics, the USTR underlined that the US aims to keep China tariffs steady in a 35-50% range ahead of the Xi-Trump meeting, while the universal tariff will be hiked from 10% to 15% “where appropriate.” The USTR also underlined the US wants a deal with Canada where it imposes some sectoral tariffs –as Canada long has on the US– and Ottawa agrees to prevent transshipment from China and Vietnam, etc.; that’s as the Chinese press suggest threatening Canada with a USMCA exit may push it into Beijing’s arms “as a hedge.” Which would then threaten North American geopolitics/economics being dragged through a hedge backwards. Chancellor Merz called for rebalancing Germany’s “unhealthy” trade ties with China. ‘How?’ is the question, as some note that many of the German CEOs travelling with him are still keen on shifting their domestic manufacturing to China and exporting it home from there.

Crucially, Zimbabwe imposed a ban on all exports of all raw minerals and lithium concentrate, as it wants crucial midstream processing to be done domestically to help it move up the value-added ladder in our new resource-centric global great game. Who will respond to that faster – China or the US? (Europe is not yet being mentioned in the mix.) Unrelated, the CME had to halt trading on its flagship metals market for more than an hour again yesterday due to “technical” issues. That does speak to how what we once thought was the global architecture is rapidly breaking down.

In AI space, the Pentagon reportedly took its first step toward blacklisting Anthropic; China’s DeepSeek is to withhold its latest AI model from US chipmakers including Nvidia, an interesting reversal; Canada told OpenAI to boost safety measures or be forced to by the government; and further upstream, France and Sweden are pushing to kill the mechanism to pay for massive EU grid upgrades needed to run AI at scale, among other things.

In the background, higher defence spending helped lift global debt to a record $348 trillion in 2025, according to the IIF –what could go wrong there on either defence or debt?– as the IMF urged Trump to change course on economic policy and stop cutting government jobs. Do these two agencies talk much? And against that backdrop, the Australian financial press today reports: ‘‘Astounding’: No affordable houses for first home buyers in any city’. Let’s just say some of us aren’t astounded by it at all.

Let’s finish with some related Fed-speak. Outgoing Atlanta Fed President Bostic yesterday published his farewell essay, in which he noted, “…the legal and rhetorical battles raging around the central bank right now have caused people across a wide cross-section of our population to begin to doubt the Fed’s independence. This is a major concern…. I won’t be part of the Fed when we see resolutions of these battles. I will be watching closely and hoping that wisdom grounded in the profound success of the US economy over many years prevails.”

Indeed, may wisdom –and good luck— prevail on multiple fronts. I fear we are going to need it.