Even as futures are feeling buoyant as a result of the JPY drop following the collapse of the Japanese ruling coalition (which in itself will likely spell serious JGB troubles in the days ahead), Middle-east geopolitical issues have once resurfaced... or technically submerged as the case may be. The Sunday Times reports that "three German-built Israeli submarines equipped with nuclear cruise missiles are to be deployed in the Gulf near the Iranian coastline." Presumably, this a defensive move: "The first has been sent in response to Israeli fears that ballistic missiles developed by Iran, Syria and Hezbollah, a political and military organisation in Lebanon, could hit sites in Israel, including air bases and missile launchers. The submarines of Flotilla 7 — Dolphin, Tekuma and Leviathan — have visited the Gulf before. But the decision has now been taken to ensure a permanent presence of at least one of the vessels." We are not sure Iran will take the news with the required dose of stoic acceptance. But at least we now have confirmation that Israeli subs are not being used by the Obama administration as a means of delivering nuclear armaments to the continental shelf (unless this too, is another Criss Angelesque Emmanuel Rahm masterpiece).
More from the Times:
The flotilla’s commander, identified only as “Colonel O”, told an Israeli newspaper: “We are an underwater assault force. We’re operating deep and far, very far, from our borders.”
Each of the submarines has a crew of 35 to 50, commanded by a colonel capable of launching a nuclear cruise missile.
The vessels can remain at sea for about 50 days and stay submerged up to 1,150ft below the surface for at least a week. Some of the cruise missiles are equipped with the most advanced nuclear warheads in the Israeli arsenal.
The deployment is designed to act as a deterrent, gather intelligence and potentially to land Mossad agents. “We’re a solid base for collecting sensitive information, as we can stay for a long time in one place,” said a flotilla officer.
The submarines could be used if Iran continues its programme to produce a nuclear bomb. “The 1,500km range of the submarines’ cruise missiles can reach any target in Iran,” said a navy officer.
It now seems that the Middle East is dead set on repeating the recent submarine-centric Korean festivites pretty much verbatim. Iran's reaction is not all that surprising:
Apparently responding to the Israeli activity, an Iranian admiral said: “Anyone who wishes to do an evil act in the Persian Gulf will receive a forceful response from us.”
The most troubling thing is that events in the Persian Gulf are moving much faster and politicians risk to lose all control imminently: precisely the stuff market melt ups are not made of.
Israel’s urgent need to deter the Iran-Syria-Hezbollah alliance was demonstrated last month. Ehud Barak, the defence minister, was said to have shown President Barack Obama classified satellite images of a convoy of ballistic missiles leaving Syria on the way to Hezbollah in Lebanon.
Binyamin Netanyahu, the prime minister, will emphasise the danger to Obama in Washington this week.
Tel Aviv, Israel’s business and defence centre, remains the most threatened city in the world, said one expert. “There are more missiles per square foot targeting Tel Aviv than any other city,” he said.
If that is indeed the case, one wonders what the logic of an act such as this one reported by Wire Update is: "Reports say Israeli ships attack Gaza aid flotilla. At least several people were killed and scores of others were left injured after Israeli ships clashed with six ships carrying pro-Palestinian activists and aid for Gaza, according to news reports on early Monday." A livestream of the attack on Turkish aid ships in international water via CNN Turkey can be seen here.
Is Israel now actively seeking not only to wage war, but a two-fronted one at that? (did not work out too well last time this was attempted). We don't know, although with bizarro futures, where the ES reacts inversely to what fundamentals suggest, look for another 100 points S&P move higher even with US markets close, as the world inches one step closer to nuclear war.