Saudi Attack Leaves Trump in a Bind on Iran

(Bloomberg) --

Just days after President Donald Trump was discussing easing sanctions against Iran, he’s now threatening a U.S. military response if it’s proved the Islamic Republic staged yesterday’s spectacular attack on Saudi Arabian oil facilities.

Trump said the U.S. is “locked and loaded” as he awaits word on verification of Iran’s role from Saudi Arabia, even though Secretary of State Michael Pompeo and other administration officials already blamed Tehran. The use of precision-guided weapons — possibly cruise missiles — was beyond the capacity of the Iranian-backed Houthi rebels in Yemen who claimed responsibility, the officials said.

But it would have been a bold move for Iran at a time when Trump is considering a meeting with President Hassan Rouhani at the United Nations this month and French President Emmanuel Macron has been championing U.S.-Iranian reconciliation.

The administration’s “maximum pressure” stance against Iran has been focused on imposing sanctions and isolating the country over its nuclear ambitions and activities in the region. As oil recorded its biggest-ever jump, Trump now faces pressure himself.

If an Iranian hand is found behind the raid, doing nothing would set a bad precedent, while retaliation risks starting a conflict that could spiral out of control. For Trump, there appear to be no good options.

Global Headlines

Snail Diplomacy | Ahead of his meeting with European Commission President Jean-Claude Juncker in Luxembourg, Boris Johnson said he’s working “flat out” to achieve a Brexit agreement. While a breakthrough is unlikely today over their lunch of snails, salmon and cheese, the U.K. prime minister must quickly find some common ground if he wants to avoid a no-deal divorce by the Oct. 31 deadline.

• While Johnson faces challenges in the courts and Parliament, outgoing Speaker John Bercow warned he’ll spend his final weeks making life difficult for the government.

On the edge | Benjamin Netanyahu staked his political fate on an election do-over tomorrow, and it’s not clear whether the outcome will be more favorable for the longtime Israeli prime minister. While polls show him ahead but still slightly short of putting together a parliamentary majority, he’ll likely be assigned to try. Netanyahu’s been working to fire up the right wing with a combination of scare tactics and promises, including a controversial vow to annex West Bank territory, to clinch a fifth term.

High-end hit | Trump’s latest tariff salvo could affect Europe’s top luxury brands, including billions of dollars in exports of whisky, wine, Champagne, handbags and men’s suits. Washington is poised to respond to a ruling that the U.S. can impose levies in retaliation for Europe’s illegal government aid to Airbus. The U.S. has identified possible targets — with duties potentially as high as 100% — on goods with a total export value of $25 billion a year.

• Subscribe to Bloomberg’s Terms of Trade newsletter to receive all the big developments in your inbox each weekday.

Nerd patrol | Elizabeth Warren isn’t winning the Democratic race so far, but she’s dominating the intellectual primary. If the last three decades are any indication, that’s a valuable asset to have, Sahil Kapur writes. The party’s past six Democratic presidential nominees all were perceived as the cerebral heavyweight in their race and went to either Harvard or Yale.

• Trump heads to New Mexico for a campaign rally today, even though some Republicans concede he’s unlikely to win the state in the 2020 election.
• Democratic front-runner Joe Biden drew a direct line between the violence of groups such as the Ku Klux Klan and recent mass shootings during a speech yesterday in Alabama.

Going green | A plan to establish the world’s largest green-energy financing initiative — $11 billion — is being thrashed out in South Africa. As Mike Cohen reports, the plan could both tackle South Africa’s unenviable ranking as the world’s 14th-largest producer of greenhouse gases and help fund the debt-stricken state power utility Eskom.

What to Watch

• China and U.S. working-level trade teams are set to meet in Washington as the Trump administration considers offering a limited agreement.
• Turkish President Recep Tayyip Erdogan hosts Iran’s Rouhani and Russia’s Vladimir Putin in Ankara today to discuss the final push against anti-regime forces in Idlib, Syria.
• The United Auto Workers union has called its first strike against General Motors in 12 years, digging in for a fight over jobs and benefits that could cost the carmaker, which has been under attack by Trump for shrinking its U.S. workforce, about $50 million a day.
• Tunisia began counting votes in yesterday’s presidential election with no clear favorite, amid signs of rising political apathy in the birthplace of the Arab Spring. Results are due tomorrow.

And finally ... It used to be that clashes around Hong Kong’s protests against China’s increasing grip on the city generally wouldn’t erupt until after dark. But demonstrators and police both were more aggressive earlier in the day yesterday than during previous weekends of rallies, with violence starting in the afternoon in a central business area near government offices and subway stations. As petrol bombs, tear gas, water cannons and even blue dye flew, there were few signs that a movement sustaining momentum into autumn is going to fizzle out anytime soon.

--With assistance from Kathleen Hunter, Stuart Biggs, Karen Leigh and Benjamin Harvey.

To contact the editor responsible for this story: Alan Crawford at acrawford6@bloomberg.net

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