Regardless of whether one agrees with Israeli political and military leaders’ assessment of the threat posed by Iran, a further escalation of the conflict between the two countries is now highly likely. Policymakers and financial risk managers may be hoping for the best, but they should be preparing for the worst.
NEW YORK – The conventional wisdom following Israel’s recent strikes on Iranian military facilities in retaliation for Iran’s ballistic missile attack on Israel is that the risk of further escalation has been contained. Initial statements from the Islamic Republic’s supreme leader suggested that Iran may not respond further, and financial markets seemed to agree, with oil prices falling 5% immediately after the Israeli strikes (even if they rose again somewhat following new bellicose statements by some Iranian military commanders).
