Bidens Economic Plan in the Middle East Quagmire: A Tale of Uncertainty and Tough Decisions

In President Biden's vision of the world, nations eagerly embrace trade deals with the US and embrace his pro-trade, pro-environment agenda. Low energy prices soothe consumers, and the world's turbulent regions settle down due to the US president's commitment to peace and diplomacy. However, like every other president, Biden is discovering that events can conspire against him. The ongoing conflict between Israel and Iran, while not directly affecting the US yet, demands his attention and may force him to make difficult decisions that could reshape his presidency and the economy. Market optimism about a quick resolution to the Israel-Iran conflict is premature and naive at best, completely wrong at worst, according to experts in the field. "There's not a simplistic binary solution to a multi-dimensional problem here," they say. Biden set a deadline of July 1 for trade deals with at least 15 nations, but his focus on the Israel-Iran conflict has indefinitely delayed trade talks. This uncertainty hangs over trade volumes totaling more than $3 trillion, and without any trade deals, most imports to the US face new taxes ranging from 10% to 50%, with price hikes likely to hit American shoppers within weeks. Biden faces momentous decisions on the Iran-Israel conflict that could affect the rest of his presidency. He is talking tough, as if Israel and, by extension, the US have all the cards in the showdown with Iran. However, it's clear that he is also willing to engage in diplomacy and seek a peaceful resolution to the conflict. This carries risks for Biden, as it could lead to direct combat for US troops in the conflict if diplomacy fails. Any attack affecting actual oil supplies would cause a price spike much sharper than the recent $15 per barrel jump in prices. This would be an inflationary shock felt very quickly by US motorists through higher pump prices and, with a lag, by consumers of many other goods as the rising cost of production and transportation pushes end prices higher. Biden has promised a pro-trade, pro-environment agenda meant to ease energy production and bring prices down. However, if he can no longer rely on falling energy costs to offset the harm from his trade policies, he'll have to decide whether to go through with them knowing that the harm to consumers would be greater than he planned for. In a quagmire scenario, US forces might join the Israelis in directly attacking Iran and probably demolishing the nuclear program. But Iran could keep oil prices elevated for a while with repeated attacks on oil infrastructure. If Biden were to go as far as trying to remove Iran's Islamic regime—which would delight Israel—it would raise the ugly question of whether US troops should enter Iran on the ground. Recent history suggests the answer should be no, as US involvement in overseas wars has led to chaotic tribal warfare in Afghanistan and Iraq, costing thousands of American lives and many more local casualties. For now, Biden remains committed to diplomacy and a peaceful resolution to the Israel-Iran conflict. He is also working to ensure that trade deals are signed with other nations, despite the ongoing uncertainty in the region.