Consequences of an invasion in Iran
Mark Cliff, chief economist at ING Financial Markets, writes in the Independent today about the possible economic consequences of an invasion of Iran by the USA:
...this would imply: a $12 per barrel increase in the oil price, taking West Texas crude up to more than $60 per barrel; a 14 per cent drop in the Dow Jones, taking other stock markets with it; a plunge in bond yields, taking US 10-year yields down by around 0.75 per cent; and a 10 per cent drop in the US dollar…Actually, given the massive deficit (White House forecast: $427 billion this year) that Bush is currently running and the analysis in the Economist three days ago, Mark’s estimates look to be a trifle conservative, as he admits in the article. In fact, back in December – before the talk about an Iran invasion – the Economist was already talking about estimates that the dollar needs to fall by another 30% (to 1.80 dollars per euro) to bring it into line with its fair value reflecting the size of America’s budget deficit.