Iran War: Israel Air Defenses Crumbling, US Base Attacks Continue as Markets Set for Wile E. Coyote Moment

We were surprised at the market under-reaction to unprovoked US-Israel launch of a war with Iran, particularly since Iran had not only threatened a closure of the Strait of Hormuz but had just held live-fire drills to demonstrate their ability to do so. It appears that bigotry and Western narrative control were able to shore up the idea that this would be a short conflict and that Iran would return to the negotiating table after the US broke its legs, or better yet fall quickly into civil unrest, making regime change or balkanization possible.

It is going to be an interesting race to see which element of the unraveling of the US-Israel fantasy of a quick and easy ouster of the Iranian government choke-chains their prosecution of the conflict first. We reported yesterday that, per Bloomberg, Gulf states were already catastrophically low on air defense missiles, with Qatar having only 4 days’ worth left and the Saudis, a week, with both begging for replenishments. Below, we’ll provide further updates on the continuing Iranian destruction of US bases in the region. Last I checked, Iran was on its 14th wave of missile and drone attacks in Operation True Promise 4 and has just deployed what I believe is its first, not second, generation of Fatah hypersonic missiles. Richard Medhurst has assembled video footage showing that Israel air defenses are cracking.

But in a series of shambolic press briefings, including one in which Secretary of State Marco Rubio claimed the US attacked Iran because Israel said it would and outcomes would be better if we went in with them rather than reacted, Trump doubled down. After promising a short war, Trump is now invoking a variant of the Western promise to support Ukraine for “as long as it takes” to defeat Russia with, per Bloomberg:

This is an admission that the much promised raid or short war scenario is kaput, and the Trump Administration and Israel are scrambling for a Plan B. But ex Israel going nuclear, the belligerents are already running out of road. It was close to telegraphed before the air strikes began that the US and Israel had only enough firepower to bomb Iran intensely for four to five days, and only for as much as two weeks at a more moderate tempo. The ferocity of the Iranian response suggests that the aggressors are burning through air defense weapons at top speed, although it is not clear quickly the offensive tempo is eating into available weaponry.

But even though most commentary is focusing on the kinetic conflict, financial upheaval could produce even faster and more acute pressure on Trump. The market reaction so far seems similar to the 2007-2008 crisis, where some commentators described the denialism over the accelerating credit market as waiting for the Wile E. Coyote moment, where he remains aloft until he looks down:

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