US-Iran Conflict Will Not Escalate To War: S&P

Global rating agency Standard & Poor’s (S&P) has said that the ongoing escalation of tensions in the Middle East in the wake of the killing of the top Iranian military commander will not lead to a full-blown war between the United States and Iran.

Iran has vowed to avenge the death of Gen. Qassem Soleimani, the head of the Islamic Revolutionary Guard Corps’ elite Quds Force, who was assassinated in a U.S. drone attack last week.

President Donald Trump warned there would be “major” retaliation if Iran attacks U.S. targets.

In a major setback to Washington’s security alliance with Baghdad, Iraq’s parliament voted to expel the US troops from its territory.

Defense Secretary Mark Esper has made it clear that the United States remain prepared for any contingency with regard to Iran, and that no decision has been made for the U.S. forces to leave Iraq.

Around 5,200 US soldiers have been deployed in Iraq as part of the international coalition to help the country’s security forces fight the Islamic State.

“If Iran chooses to go the other path, we are prepared to deal with that and will respond forcefully,” Esper said at a Pentagon news conference Monday.

US military’s chief Gen. Mark Milley told reporters that there are increased levels of U.S. troops movements in rotary-wing helicopters in Iraq between Baghdad and Taji and other camps and stations. In addition, more U.S. forces are being brought from Kuwait.

Although tensions soared in the Gulf region in the last few days, “this development does not alter our base-case assumption that any military action by either side will not lead to a fully-fledged direct military confrontation,” the S&P said in a statement Tuesday.

“We continue to believe that any escalation will remain contained given that a direct conflict would be economically, socially, and politically destabilizing for the entire region, including US-Gulf allies,” it said.

If proxy conflicts intensify, it will undermine confidence and investment in the Gulf region, according to the rating agency.

“Our ratings on Gulf sovereigns already take into account a certain level of regional geopolitical volatility,” says the S&P statement.

According to it, in the context of a wider conflict, and export routes remain functional, “Abu Dhabi, Kuwait, Qatar and Saudi Arabia would likely be better cushioned by their large stocks of deployable government external assets.”

“On a flow basis, we view Bahrain and Qatar as more vulnerable to outflows given their high external financing needs, relating to their respective banking sectors.”

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