Winter Storm Watch: Geopolitical Risk & the 2020 Outlook

By Diane Swonk, Grant Thornton

The policy landscape in the U.S. has become much like the weather in Chicago; it can change dramatically in the course of a day. That is what happened on January 2. The escalation of tensions with Iran following the killing of a top Iranian general by the U.S. has introduced a whole new host of downside risks to the outlook. I spent the past few days reading and talking to geopolitical experts to get a better sense of what may occur. It was not relaxing (understatement).

The Iranians have stated that their beef is with the president, not the American people; their goal was to attack U.S. military bases, which they did on January 7. There were no casualties or major damages, which the White House and the rest of the world read as an attempt by Iran to de-escalate.

The president has called upon NATO for support in sanctions against Iran, which is a heavy lift given the deterioration in relations with our closest allies. Iran has been a serial aggressor in the region and has threatened to continue to up the ante. Iran has several options:

  • Targeted attacks and blockades in the Strait of Hormuz, which would trigger a spike in oil prices. Much of the oil from the Middle East traverses those waters.
  • Attacks on Saudi oil fields. Iran used drones to attack a field in September as an extension of its proxy war with Saudi Arabia in Yemen.
  • Fomenting a civil war in Iraq, disrupting oil exports.
  • Cyber attacks.
  • Terrorist attacks on American citizens.

Read the full article here.