Preparations or bluster: Is the US Preparing to Attack Iran?: 2025.06.18
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In this roundup, we continue our closer look at the US – Israel Alliance War on Iran.
While the head of the IAEA went on record saying his organization found no evidence of a structured Iranian program targeting development of a nuclear weapon, and while Trump was reminded of the most recent assessment by his intelligence community which concluded there was no nuclear weapons program in Iran, the US president nevertheless doubled down on his aggressive language regarding the Iranians. He implicitly threatened to kill the Iranian Supreme Leader the Ayatollah Khamenei, and demanded from Iran an unconditional surrender.
Indication are that it is not going to stay at just threatening words, as the US continues its redeployment of military hardware towards the Middle East, while the US navy fleet based in Bahrain has sailed out so as not to become an easy target if and when Iran retaliates in response to a US strike.
Nevertheless, the Iranian leadership has communicated defiance, while China appears to be providing Iran with support. The extent of that support will be a big factor determining the next stages of this war.
Furthermore, we look at:
The IEA’ latest energy outlook
Why the global investment community has cooled significantly on the oil and gas industry
The US president Donald Trump’s tax cuts package; where EPM shares reflections on how this is likely to impact the broader economy
Ongoing massacres at so-called “aid distribution points” operated by the US – Israel Alliance’s Gaza Humanitarian Foundation, where on Tuesday starving Gazans were shelled by Israeli tanks, killing over 50 and wounding over 200
The proposal to accelerate ending the Biden-era IRA subsidies for solar and wind energy
General Energy
Oil prices are rising, on Wednesday extending a 4% gain from Tuesday, both on worries that the Iran-Israel conflict could disrupt supplies, writes Reuters. Brent crude futures were at $76.71 a barrel by 0440 GMT while WTI crude futures were at $75.19 per barrel.
Global oil demand will keep growing until around the end of this decade despite peaking in top importer China in 2027, as cheaper gasoline and slower electric vehicle adoption in the United States support consumption, the International Energy Agency said on Tuesday, according to Reuters. Despite seeing an earlier demand peak for China, the IEA, which advises industrialised countries, stuck to its prediction that global demand will peak by 2029 at 105.6 million barrels per day (bpd) and then fall slightly in 2030. This view sharply contrasts with that of producer group OPEC, which says consumption will keep growing for much longer.
Whether peak oil demand happens in the 2020s or 2030s, analysis by S&P Global indicates that the global investment community already sees the oil industry as being in its “twilight phase”, writes the Financial Times. The S&P Global Oil index, which tracks the share prices of 120 leading international oil producers, is no higher now than it was in 2015. With the exception of a sharp dip during the Covid pandemic, it has flatlined while investors have flooded into Big Tech. To shore up their investment cases, oil companies stress that peak demand does not mean the end of oil. Use is expected to persist for decades — driven by aviation, shipping, petrochemicals, and road transport in emerging markets — especially if politicians scale back their climate ambitions and focus on energy security and affordability. But EPM notes, investors are looking for companies that can grow, not for companies that can survive in a declining market.
Macroeconomics & Technology
US president Donald Trump’s tax cuts package will increase deficits by $2.8 trillion over the next decade, says the US Congressional Budget Office (CBO), according to the Associated Press. The analysis factors in expected debt service costs and finds that the bill would increase interest rates and boost interest payments on the baseline projection of federal debt by $441 billion. Here’s how EPM sees how this piece of legislation will play out":
The US economy has been called a “bright spot” in the global economy over the past few years, but in large part this has been due to deficit spending by the US federal government. One reasonable expectation is for this effect to be continued by the Trump tax plan.
The tax plan is said to favor in particular the wealthier segments of US society. EPM notes that these segments already have incomes and wealth levels that far exceed their spending needs, and as such any further “handouts” for them is most likely to be used for investment, i.e. stocks and bonds. In our assessment, therefore, Wall Street is the most likely beneficiary, not Main Street.
The tax plan’s impact on US debt will increase the global doubts today about the US’s viability to remain the financial’ world’s “safe haven”. This is likely to put downward pressure on the US dollar, but also upward pressure on treasury yields, both of which bring the US closer to the “systemic collapse” point which occurs when the US dollar becomes “just another currency” and international capital flows no longer allow / enable US federal government deficit spending, as at that moment the US will go bankrupt overnight.
The global central banking community is already worrying about the above mentioned “worst case” scenario. The New York Fed's latest “custody” data shows a steady decline in the value of Treasuries and other U.S. securities held on behalf of foreign central banks, writes Reuters. The value of U.S. Treasuries held at the New York Fed on behalf of foreign central banks fell to $2.88 trillion. That's the lowest since January, and the $17.1 billion decline was also the biggest fall since January. Including mortgage-backed bonds, agency debt and other securities, the total value of foreign central banks' U.S. custody holdings at the New York Fed last week dropped to $3.22 trillion, the lowest since 2017. That figure has fallen by around $90 billion since March, just before President Trump's “Liberation Day” tariffs on April 2, with more than half of the decline coming from Treasuries.
Bloomberg writes that it is not the push to ram through tax cuts that will add to bloated deficits and debt that are driving investors away from the US. Also playing a role are the across-the-board tariff hikes that shocked allies and upended trade; the pressure campaign to get the Fed to slash interest rates; and the bare-knuckled legal tactics employed against those who oppose his policies. It is a dangerous game, Bloomberg writes. The government’s annual financing needs have skyrocketed to over $4 trillion after years of runaway budget deficits. Much of that financing comes from foreign creditors, and the more the dollar sinks, the bigger the losses they suffer when converting their investments back into their local currencies. At some point, if things get bad enough, a sort of vicious cycle could kick in. Dollar and deficit concerns prompt foreigners to repatriate their money, which drives up borrowing costs and compounds both the dollar declines and fiscal woes, which then in turn heighten these worries and so on and so on. This is the “systemic collapse” that EPM discussed above.
Geopolitics
As to Iran, in an interview with Tucker Carlson, US congressman Ted Cruz said “We’re carrying out military strikes [on Iran] today,” writes The Independent. When asked whether he really meant “we”, Cruz backtracked by saying, “Right, right, with our help.” Both of Cruz’s remarks indicate active US involvement, however, and contrast the official US narrative.
On Wednesday in his social media posts, Trump showed his worst side. First he wrote that the US – Israel Alliance knows where Iran Supreme leader the ayatollah Khamenei is staying, and that they have consciously chosen not to kill him – yet. That is a death threat to foreign head of state, EPM notes. Then, writing in capital letters, Trump demanded from Iran an “unconditional surrender”, writes The Guardian. What Iranian crime exactly warrants this treatment Trump leaves undiscussed. The Associated Press writes that when reminded of the March 2025 assessment by his own intelligence agencies that Iran has not been working on the development of a nuclear bomb since Khamenei’s 2003 fatwa against nuclear weapons, Trump said, “I don’t care what she said,” with “she” referring to his own national intelligence director Tulsi Gabbard. In the EPM assessment, this makes clear that by the standards of international law, that the US itself crafted and has promoted since the Nuremberg Trials, the US – Israel Alliance War on Iran is a crime: a war of aggression, which through an unprovoked attack, targeting the destruction of government institutions and the killing of political leadership, seeks to make a sovereign nation submit to a foreign entity. At a later stage, EPM will write down what it is likely to mean for the world, now that the US has more openly accepted and brazenly engaged in this kind of behavior.
As if to hit EPM’s point home, IAEA director general Rafael Grossi went on CNN and said, “What we reported was that we did not have any proof of a systematic effort (by Iran) to move toward a nuclear weapon”, writes The Craddle.
As to how the war is going, the attacks on Iran’s capital Tehran intensified, writes the Associated Press. Israel claims that these attacks had killed Iran’s General Ali Shadmani, who had been appointed last week to head of the Revolutionary Guard’s Central Headquarters following the killing of his predecessor, General Gholam Ali Rashid.
While Israel continued to attack Iran, US president Trump met his National Security Council in the White House Situation Room for an hour and 20 minutes, writes Axios. It is speculated that the subject for discussion was a possible active US involvement in the attacks. There is no clarity as to what was decided, but after the meeting trump called Israeli prime minister Netanyahu, who continues to expect active US support to go after Iran underground nuclear facilities, Axios adds.
Indications are that the meeting with the NSC has led to a decision to “attack”. Newsweek writes that the US fleet in Bahrain has left port. This untypical development only makes sense in the context of the US preparing for retaliation by Iran in response to a US strike on Iran. In addition, Reuters writes that after sending additional refueling planes in the direction of the Middle Eastern theater, the US military has increased the number of fighter jets it has in the area. In EPM’s assessment, actions by the US navy stationed in Bahrain are a strong indication that Trump is not bluffing, but that he is really preparing to attack Iran.
The Financial Times discusses whether the US has the ability to destroy Iran’s nuclear facilities. The Natanz site is vulnerable, but there are strong doubts Iran’s main site, Fordow, can be reached by even the most sophisticated US weaponry. To have a chance, to US would need to strike the exact same spot twice with one of its GBU-57 E/B Massive Ordnance Penetrator, or MOP, the world’s most powerful non-nuclear bomb. It’s possible, but has never before been done in a conflict situation, FT says.
In the background The Telegraph writes that China appears to be supplying Iran. A day after Israel attacked Iran on Friday, a cargo plane took off from China and flew to Iran. The next day, a second plane. Then on Monday, a third departed, this time from Shanghai. The type of plane used, the Boeing 747 freighter, is commonly used for transporting military equipment and weapons. In our initial analysis of the US – Israel Alliance War on Iran last Friday we explained the strategic imperative for China (and Russia) to support Iran.
EPM suspects that China is providing not just material but also psychological support to the Iranians. Iran’s Supreme Leader Ayatollah Ali Khamenei has responded defiantly to Trump’s threats, writes Bloomberg. “The Americans should know that any military incursion by the United States will undoubtedly result in irreparable damage,” Khamenei said in a statement in response to Trump.
Back to Gaza, where on Monday Israeli troops killed 34 starving Gazans who gathered near Rafah with the hope of receiving some form of aid from the GHF, writes the Associated Press. Israeli troops started firing as thousands of Palestinians massed around 4 a.m. at the Flag Roundabout before the scheduled opening time of the Rafah food center. Witnesses described being fired at from multiple locations, leaving no room for escape. The Red Cross field hospital nearby received some 200 injured. A day earlier, it said, around 170 were brought to the facility, most of them wounded by gunshots while trying to reach the GHF center. According to Reuters, in another incident on Tuesday near Khan Younis 51 people were killed, and over 200 injured of which 20 critically, when Israeli tanks launched shells into a crowd. According to eyewitnesses, the Israelis first drove the starving people together, and then had their tanks opened fire. After the incident the Israeli army released a statement saying it is reviewing the incident. “The IDF regrets any harm to uninvolved individuals and operates to minimise harm as much as possible to them while maintaining the safety of our troops," it added.
Energy Transition
A Republican committee in the US Senate is proposing that the government support for solar and wind energy, part of the Biden-era 2022 Inflation Reduction Act, be phased out in accelerated manner. Starting in 2026, they want to see incentives reduced to 60% of their value and coming to a complete end by 2028, writes Reuters. Under the current law, the tax credits would not start being phased out until 2032. At the same time, their proposal includes terms to extend government support for hydropower, nuclear and geothermal facilities beyond 2032, until 2033, and then phase them out to zero by 2036.