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Tensions between the West and Iran are on the rise. After landing an American drone, the Iranian Revolutionary Guard has been put on alert for an imminent war.  Operational readiness has been heightened, especially against external strikes and secret operations.  

Another sign of defiance came from Lebanon: The leader of Iran-backed Hezbollah, Hassan Nasrallah, came out of his bunker and met some supporters for the first time since 2008. a war break out in the upcoming days? The Israeli political schedule provides a hint.

Mysterious explosions have rocked the Islamic Republic in recent weeks – one was directed at the Iranian missiles, and the other damaged a nuclear installation near Isfahan.

The rhetoric on both sides has become more militant. In the Arab world:

  • In his rare public  appearance, Nasrallah said that a US / Israeli operation in Iran or Syria will trigger a regional war.
  • The Iranians continue their threats against Israel, the US and the UK, following the assault on the British embassy.
  • Syria has also performed a massive military drill, in the middle of its civil war. An external enemy could calm the ongoing struggle of the opposition to overthrow the Assad regime.

Israeli threats and political schedule

Israeli Prime Minister Netanyahu hinted that Israel will withstand the pressures to avoid an operation against Iran. His “history lesson” was  undoubtedly a preparation for a war.

He also moved to bring forward the internal elections in his Likud party to the end of January. Is Netanyahu planning a war that will end by the end of January?

  • The report about an Iranian alert for a war came from Britain, through the Telegraph. It seems that also Britain is raising the bar.
  • In the US, it seems that the US administration is frustrated with the Israeli approach and wants Israel and the Palestinians to return to the  negotiations  table, as the clock is getting close to midnight.

Is a war really coming soon? Or are the higher rhetoric and the military preparations just part of a game?

A few weeks ago, I provided 5 reasons why Israel will not attack Iran. Since then, the higher rhetoric, the mysterious explosions and the Iranian capture of a US drone make a war more possible.

How will currencies move in forex markets? The dollar is likely to be the main beneficiary, with other risk currencies losing ground. The situation of the Canadian dollar (an exporter of oil) and the Swiss franc is more complex.

For all the potential currency movements in case of an Israeli – Iranian confrontation, see this analysis.

Update, December 8 2011: A clash between Israel, Syria and Lebanon could precede a conflict with Iran.

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