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Israel and the U.S. are seeking regime change in Iran.

Initial reports of Israel’s attack on Iran indicated the former nation was simply seeking to deter the latter from developing nuclear weapons. To that end, Israel took out key nuclear scientists from Iran’s regime with targeted strikes, while also destroying nuclear-related facilities.

However, over the weekend the geopolitical picture became much clearer. Some of the key developments of note:

1. Israel has destroyed the Tehran Police HQ, Intelligence Ministry, Iranian Navy HQ, Justice Ministry, and Iranian Air Force HQ.
2. Israel’s intelligence (Mossad) had previously carried out several operations to sabotage Iran’s missile defenses.
3. Israel destroyed the headquarters for Iran’s “riot police” which have been responsible for suppressing political uprisings against the country’s Islamic leadership.
4. The U.S. is alleged to have been coordinating with Israel throughout the attacks.

The last revelation is key.

IF the U.S. has been involved in this entire process, then it is clear the goal was regime change in Iran, not simply crippling Iran’s nuclear development programs.

The financial markets appear to be confirming this.

If the markets were discounting a global conflagration/ World War III scenario, stock futures would be collapsing. They’re not. As I write this Monday morning, futures are UP, not down. This suggests that Iran’s current government will fall shortly, and the situation will be resolved without global escalation. Indeed, when you look at the chart of the S&P 500’s futures, you’d be hard pressed to even tell there was a major conflict underway!

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Having said that, while stocks are not indicating anything major, the currency markets are.

Historically, the USD has been considered a safe-haven during periods of geopolitical upset or surprise: the greenback rallied 2% during the 9/11 attacks as well as when Russia invaded Ukraine.

Not this time.

The USD has barely bounced at all since Israel first attacked Iran Thursday night. In fact, as I write this Monday morning, the USD is DOWN. Looking at the chart you’d never even know that anything had happened on the geopolitical front. And this is during a regime change in Iran that has major geopolitical consequences for the balance of power (Iran is a close ally of Russia, China imports 90% of Iran’s oil, etc.).

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So, the fact the USD hasn’t rallied during this entire episode is very telling. And it is telling investors that the markets are now in a weak USD regime… even during periods of heightened geopolitical risk.

That is what we in the investing business call a major “tell,” indicative that a new trend is unfolding that has the opportunity for MAJOR returns.

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