There are several “macro” considerations that impact this latest conflict and its ability to escalate and trigger larger military actions and death.
The Russian ruble is trading under 1 ruble to the US dollar so the Russian economy has nothing left in the tank to support more manufacturing of weapons to support Iran or Syria.
Russia has already curtailed exports of petroleum products, reflecting its inability to maintain its domestic refining infrastructure to serve its internal needs for its economy and its excursion in Ukraine.
The US is already finding its internal stocks of missiles and ammunition depleted from support given to Ukraine. Some experts have estimated it would take US firms 2-3 years to replenish inventory levels to our normal reserve levels. Other western aligned countries seem to be in a similar situation. This means there is VERY little left in the tank to give Israel for any extended offense without jeopardizing support for Ukraine.
One larger concern arising from this attack involves the value of big-dollar weapons systems and operation of a national security state with billions spent on “intelligence” that ultimately fail so catastrophically. By all accounts, Israeli intelligence was completely suprised not only by the timing of the attack but its scope and breadth. Presumably, so was the US. Hamas apparently flipped most of its command and control communication to messengers on motorcycles to keep information off electronic networks. People have to shuttle in and out of Gaza every day through Israeli checkpoints so this made it easy to hide communication in the lowest-tech way possible, in plain sight.
The multi-billion dollar Iron Dome missile defense system works amazingly well, unless the enemy stockpiles weapons for YEARS then unleashes HUNDREDS in minutes. The US is sailing the USS Gerald Ford and support ships off the coast to provide a base for helicopters, etc. but the ultimate value of that $12.8 billion dollar ship is questionable in this event. Hamas didn’t worry that its enemy was allied with someone owning that type of firepower.
On one hand, one might think these limitations imposed by already out-of-control spending on existing military disasters would limit the chance of a rapidly escalating conflict. That might be true with more rational actors but the events over the last two years – or even the last 75 years – make it clear none of the parties involved in any of these pair-wise conflicts are thinking rationally. When people with limited imaginations and more limited morality feel they are existentially threatened and out of options or feel they’ve devised a scheme to apply a long-awaited fatal blow to their enemy, it becomes vastly more difficult to predict next steps.
Meanwhile in the US, in one chamber of Congress, one Senator continues to block military promotions involving positions actively involved with supporting whatever the US chooses to do to back Israel. In another chamber of Congress, paralysis within the majority party seems to be resulting in more extremist candidates being suggested to become Speaker while we have a debt ceiling fire drill looming in another 40 days or so. The replacement of the Speaker will trigger ENORMOUS conflict over the United States’ military support for Ukraine and Israel, magnifying existing divisions that could delay filling that position to delay action on a budget solution.
I suspect this will make bond prices and interest rates VERY difficult to predict. On one hand, if this latest war escalates rapidly, a “flight to security” might boost Treasuries, lowering short term interest rates. On the other hand, the continued failure of the US government to handle basic budgeting responsibilities should be spooking interest rates up, making direction very difficult to forecast. Back around 2010 when the US was only carrying $14.5 trillion in debt, each one percent increase in interest rates increased interest payments on that debt by $58 billion. Now, US debt is about $23 trillion so easily each one percent increase will reduce dollars available to spend on actual programs by over $92 billion. For comparison, as of September 2023, the US has given Ukraine about $75 billion total in aid since February of 2022.
In short, this new conflicts arrives at a point where America has penned itself into a set of least-worst only choices. Any move in any direction is going to come at the cost of material pain to our economy, our priorities and our allies.