U.S.-Iranian relations are back where they were in 2013. But the next few years will play out differently this time around.

From 2012–2013, the U.S. and Iran fought a financial war. The U.S. first banned Iran from the U.S. dollar payments systems (FedWire) and later worked with allies to ban Iran from the global payments system for all major currencies (SWIFT). This meant that Iran could ship oil but could not get paid in hard currency.

This started a collapse of the Iranian rial price relative to dollars and a run on the banks in Iran. The Iran central bank raised interest rates to 20% to keep deposits in the banking system. Hyperinflation broke out, the rial fell 50% against the dollar and imported consumer goods became scarce. Smuggling was rampant. Iran was destabilizing and moving closer to regime change without a shot being fired.

In late 2013, Iran agreed to meet with the Obama administration to discuss its nuclear weapons activities in exchange for financial sanctions relief. The result was the 2015 Joint Comprehensive Plan of Action (JCPOA), which supposedly limited Iran’s nuclear activities but was in fact a sham. Obama topped this off by delivering over $100 billion in cash, gold and sanctions relief.

In 2017, President Trump abandoned the JCPOA and reimposed sanctions. Except now the sanctions are even more draconian. The U.S. is not only limiting Iran’s access to currency payments systems, but is also banning Iranian oil exports and imposing penalties and secondary boycotts on European and Asian companies that do business in Iran.

In addition, Iran wasted most of the money provided by Obama financing terror in Yemen, Syria, Lebanon, Gaza and Iraq. Now Iran faces the toughest sanctions yet without financial reserves and no access to international trade. Iran’s only recourse is to threaten terror aimed at the U.S. and Israel.

According to this article, the U.S. has positioned bombers and an aircraft carrier task force in the vicinity of Iran to retaliate for any attacks. This tense situations resembles 2013, with one important difference: Trump is not interested in bad deals. It’s up to Iran to offer the U.S. real concessions regarding their nuclear efforts — or face the consequences.

Escalation and outright war are real possibilities in this latest confrontation. This is just one more element of uncertainty that investors must throw into the possible mix of market-moving events.

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