Israel

Whether related to the broadly escalating violence in the region or not, the latest development out of Israel is sure to bring even more geopolitical tension, especially with Iran adn Syria already on edge following their own violent protests (and arguably looking for a political scapegoat). BBC reports that "Palestinian militants in Gaza have fired dozens of missiles into southern Israel in what appears to be their heaviest such barrage in two years. About 50 mortars were fired - two Israelis were hurt, Israel says." Never one to step away from an escalation, Israel replied in kind: "Israeli tanks later shelled targets in the coastal strip, wounding at least five people, Palestinian officials say." We are confident newsflow out of Israel and Gaza will intensify as the latest and greatest Black Swan out of the middle east is now stretching its wings.

Two Iranian warships planned to sail through the Suez canal en route to Syria on Wednesday, Israel's foreign minister said, calling the move the latest "provocation" by Tehran and hinting at an Israeli response. "Tonight, two Iranian warships are meant to pass through the Suez Canal to the Mediterranean Sea and reach Syria, something that has not happened in many years," Foreign Minister Avigdor Lieberman said in a Jerusalem speech distributed by his office.

In what can only be described as broadly market positive news (remember in bizarro world $200 oil is equivalent to 2,854 on the S&P), Jerusalem Post reports that the leader of Hezbollah Hassan Nasrallah is ready for another war with Israel and will "conquer the Galilee."  "I tell the fighters of the resistance that one day they might be asked to liberate the Galilee," Nasrallah said at a "Resistance Martyrs Day" ceremony. "The Israelis are afraid," Nasrallah said. "I want to assure you and tell the Israelis that they should be careful because the blood of Imad Mugniyeh will not go to waste." Presumably, Hezbollah has been closely following Israel's response to recent revolutions across the region, and likes what it sees: "The Hezbollah leader also discussed Israel's reactions to the protests across the Middle East, citing Defense Minister Ehud  Barak's assessment that the Middle East is "changing in front of our eyes." "This shows that Israel, which was confident in the past, is no longer," as it was, Nasrallah said." And following that profound piece of psychological insight, all we can say is BTFD, or we would, if Bernanke allowed dips any more.

"In terms of atmospherics, Hacham said the Israeli delegation was "shocked" by Mubarak's aged appearance and slurred speech. Hacham was full of praise for Soliman, however, and noted that a "hot line" set up between the MOD and Egyptian General Intelligence Service is now in daily use. Hacham said he sometimes speaks to Soliman's deputy Mohammed Ibrahim several times a day. Hacham noted that the Israelis believe Soliman is likely to serve as at least an interim President if Mubarak dies or is incapacitated. (Note: We defer to Embassy Cairo for analysis of Egyptian succession scenarios, but there is no question that Israel is most comfortable with the prospect of Omar Soliman.)"

More information is starting to emerge about the Stuxnet virus which we discussed extensively previously. Richard Falkenrath, a principal at Chertoff Group, talks to Bloomberg and does a good overview of the impact of Stuxnet, and just how substantial its destructive potential could be. Among his observations is that "it took the resources of a nation state to create this piece of malware." And considering that the ultimate target of Stuxnet infections is Iran, and specifically its Bushehr nuclear reactor, it is not all that surprising that according to Falkenrath the originating country is Israel. The only question is whether Iran also has access to comparable high sophisticated technology (and if so, whether the recent crash in the CFTC's server preventing the disclosure of today's Committment of Trader report has anything to do with it). The amusing bit, is that Iran's nuclear power plant actually does run Windows. Which makes one wonder why go to such great lengths instead of having someone merely remind the host computers that the local version of Win95 is and has always been pirated.

Oops

In an interview by Likud Knesset Member Danny Danon, speaking with WND senior reporter Aaron Klein, who hosts an investigative program on New York's WABC 770 AM Radio, the Israeli said that "Israel is preparing for a time of war...We are ready for all scenarios, and we are able to defend our civilian population. I cannot tell you how long we can wait more. But we prefer to wait and see if the international bodies are acting, or [whether] it will be only the burden of Israel, like it was in the early '80s, when the great leader, Menachem Begin, [made] the great decision to bomb the nuclear reactor in Iraq." He concluded: "We don't want this to be a war of Jews against Muslims. It should be a war of Western civilization [against] Iran." Good luck explaining that to 1.5 billion Muslims around the world.

As has been widely anticipated, Iran is currently in the last stages of preparation before pushing the On button for its brand, spanking new (and 20 years in the making) nuclear power plant. As Reuters reports: "Television showed live pictures of Iran's nuclear chief Ali Akbar Salehi and his Russian counterpart watching a fuel rod assembly being prepared for insertion into the reactor near the Gulf city of Bushehr." Yet despite Russia's guarantee that it would collect spent rods that could be used to make weapons-grade plutonium, Israel is not taking this development lightly at all, and as Jerusalem Post reported earlier, warned that "It is totally unacceptable that a country that blatantly violates decisions of the United Nations Security Council and the International Atomic Energy Agency, and ignores its commitment to the Non-Proliferation Treaty charter, will enjoy the fruits of using nuclear energy," according to Foreign Ministry spokesman Yossi Levy said. Which in turn has prompted Ahmadinejad to warn that a strike on Iran would be answered with "harsh and painful" response. All in all, just another Saturday in the middle east.

In an interview with Fox Business News, former US envoy to the UN, John Bolton, told the channel that if Israel wants to prevent Iran from acquiring a working nuclear plant, then a military strike must be launched against the Bushehr nuclear power facility within the next eight days. Specifically, Bolton was envisioning the projected August 21 launch date of the nuclear power plant, which Zero Hedge noted previously. According to Bolton, once the Bushehr facility is operational it will be too late for a military air strike against Iran because such an attack would affect too many Iranian civilians due to the spread radiation.

Just in case you missed the strategic implications of the prior post, here is some breaking news from BNO: "Israel Prime Minister Benjamin Netanyahu on Wednesday said that Hamas was responsible for the rocket attacks last Monday and that the Jewish nation will retaliate."

The Steering Group of the Veteran Intelligence Professionals for Sanity (VIPS) which consists of Phil Giraldi, former CIA (20 years), Larry Johnson, former CIA; DoS, (24 years), W. Patrick Lang, Col., USA, Special Forces (ret.); Director of HUMINT Collection, Defense Intelligence Agency (30 years), Ray McGovern, US Army Intelligence Officer, CIA (30 years), Coleen Rowley, FBI (24 years), and Ann Wright, Col., US Army Reserve (ret.), (29 years); Foreign Service Officer, Department of State (16 years), have penned a memo to the president in an attempt to alert him "to the likelihood that Israel will attack Iran as early as this month. This would likely lead to a wider war." Read on for the full memo by the activist group.

Earlier today, the Middle East again came once step closer to war after the latest Israel-Lebanon clash claimed the most lives since the Second Lebanon War. As part of the escalation, 3 Lebanese soldiers and 1 journalist were killed, as well as an Israeli officer, over what appears to have been a day of gardening gone horribly wrong: Haaretz reports: "The violence apparently erupted over a move by Israeli soldiers to trim some hedges along the border, a sign of the level of tensions at the frontier where Israel fought a war in 2006 with the Lebanese militant group Hezbollah." Surely this latest escalation explains the most recent surge in stocks, as Ben Bernanke will now have an excuse to take his money paradrop operation over to the Middle East, in hopes of keeping everyone occupied through endless amazon.com purchases of assorted useless gizmos.

Things in the middle east are back to normal (which means the usual deadly massacre), although with a twist. An earlier rocket attack on the Israel port city of Eliat missed its target completely, and instead slammed into Aqaba, in neighboring Jordan, located 6 miles away just over the border. Instead of firing the rockets from Israel and prompting immediate airborne retaliation, the launch point for today's attack was Egypt, which prevent Israel (or should that be Jordan) from retaliating. Sky News reports that the reason for the shelling is connected to a recent agreement that will see the Palestinian authorities talk face-to-face with the Israelis, and radical elements, who do not want that to happen, are escalating the violence as a means to stop it. It is unclear if Jordan will also escalate now that its own territory has been impacted in the ongoing conflict, and it is also to be seen how Egypt will react should it become perceived as a peripheral zone of cross-border attacks.

As we first reported last week, in an article that was met with much original skepticism, the Pentagon has now confirmed that a fleet of 12 warships has passed the Suez Canal, and is now likely awaiting orders to support the escalation in the Persian Gulf. The attached image from Stratfor shows the latest positioning of US aircraft carrier groups as of June 23: the USS Harry Truman (CVN-75) is now right next to USS Eisenhower (CVN 69), both of which are waiting patiently just off Iran. As for the catalyst the two carriers may be anticipating, we provide the following update from the Gulf Daily News where we read that Israel may be on the verge of an attack of Iran, with an incursion originating from military bases in Azerbaijan and Georgia.

It appears that tensions are escalating between Gaza and Isreal. The Jerusalem Post reports that 3 members of an Islamic militant group had been killed after launching two rockets into southern Israel, which "landed in open areas and caused no injuries." This was allegedly immediately followed by an airborne retaliation: "The IDF confirmed it had carried out an airstrike Tuesday, and Gaza's chief medical examiner said there were three deaths." Doesn't end there: the Israeli media reports that "two Palestinian terrorists were identified infiltrating into Israel from the southern Gaza Strip earlier this morning. The soldiers on the scene exchanged fire with the terrorists, killing them both." We are still awaiting for the other perspective on these escalations, although so far have been unable to attain an impartial view on events. In other news Al Jazeera quotes Mossad Chief Meir Dagan as saying on Tuesday that Israel is progressively becoming a burden on the United States. "Israel is gradually turning from an asset to the United States to a burden," said Dagan, speaking before the Knesset's Foreign Affairs and Defense Committee.