The US and Israel are betting on regime change in Iran through air attacks that began on Saturday. So far, bombardment has left Iran’s top leader Ayatollah Khamenei dead and sparked a retaliatory flare-up in West Asia.
This is a gamble, although US air-strike precision has improved since its 2003 war on Iraq to end Saddam Hussein’s rule, an invasion that left countless civilians dead and inflamed the region.
This time, the White House has urged Iranians to rise up and overthrow their rulers. It expects a youth rebellion to depose a “threat” that has long defied its authority. Will the US invade to see that aim met?
In a best-case scenario, it won’t—and an oil-price spike would be brief. However, a tail-risk case of another “forever war” could plausibly lend weight to the “Ray Dalio thesis”: that is, of America’s debt pile foreseeably flipping it into a phase of decline, as with over-leveraged empires across history.
We can expect the yield curve of US bonds to steepen anyway if the Fed begins to shrink its balance sheet under its likely next chief. But US yields and capital costs risk turning volatile if this war proves costlier than expected. All said, this dice roll has driven global uncertainty up.