Happy New Year! Unfortunately for many, it appears that 2020 began with conflict rather than peace and understanding.
The United States finds itself at another diplomatic crossroads with two volatile, potentially nuclear weapon-capable nations: Iran and North Korea.
After a recent strike on Iran by the US army, protests erupted in the capital Tehran and the American embassy there was under siege. Donald Trump took to Twitter to threaten Iran with an outright war unless the country stops resisting. Yet, Iran’s actions are a direct response to the increased military pressure from the United States after Donald Trump decided not to renew the Iran nuclear deal, which previously proved successful at keeping the peace in the region. It seems that the US President has to deal with problems that in one way or another, he created himself.
The situation with North Korea is somewhat similar. Earlier in his Presidency, Trump shocked the world by trying to form a friendship with the isolated communist country and its leader, Kim Jong-un, despite his status as a dictator and his office’s human rights violations. Trump promised to make North Korea abandon its nuclear program and bring an end to missile tests threatening US allies in the region such as South Korea and Japan.
However, Trump did nothing to follow up on his promises and Kim Jong-un got restless, in turn saying he might attack during the holidays. Now he announced that North Korea has a new weapon to reveal soon, and many speculate its long-range missiles that could fly directly to the US.
Both situations are particularly concerning because 2020 is an election year in the United States. Trump’s habit of threatening other countries and their leaders from the comfort of his Twitter feed might make him vulnerable to criticism and cost him the election. Investors will be following the elections with the USD’s value in mind.
Furthermore, escalations in any geo-political conflicts will remain relevant for anyone interested in safety assets such as the Japanese yen and gold, among others.
