Demystifying global challenges is not an easy task these days. My reflections during the course of this year's European trip emphasize, in my view, the essential course the West must take to consolidate tricky situations. Brexit and EU instability are part of it; and ideally reach the key compromises with China; to preserve desirable aspects of limited, but not overreaching, globalism.  

Now Oil enters the stage in key ways. And as the geopolitical impact is potentially being underestimated by analyst crowds that suggest it's of only short term potential. The daily reaction; yes. But one reason in my intraday comments Monday I emphasized defensive neutrality 'at best', related to the prospect that we awake to a military response to this.  

It's believed by many, not merely hawks; that this was an attack on the global energy supplies; rather than merely on Saudi Arabia. Expected to be revealed: that the 'cruise missile attack' (or mixture with drones); was too precise to be rudimentary navigation targeting as I mention in the main video, as pictures of the damage to storage tanks shows in a couple instances where the incoming projectiles penetrated tanks in a precisely targeted way, but failed to explode; hence telltale evidence of how accurate the targeting was (and little collateral damage).  

As a result overarching financial and trade issues won't transcend the immediate fear of conflict in the Middle East; although they matter too. Even the monetary shocks that trigger a fear of a busting bond bubble and so on are sort of on the back-burner for the moment. These aren't insignificant risks of course. In fact until the last couple days they were paramount. So the focus shifts to 'how high Oil goes' and that depends on strategic developments; and realization that the U.S. is independent but the more the world relies on our supplies; the more impact this has on global growth (and fuel prices especially outside the USA).  

Sure, perhaps it's the fiscal policies (monetary offsets) that do need to be structural drivers of economic growth; and that matters for the U.S. and for Europe in the fullness of time. Fiscal policies remain in a mess globally. As much as we seek answers (including chat yesterday with a very young slightly-intellectual economist); answers remain illusive.  

That's beyond the Middle East crisis; beyond Brexit; but relates to it all. For sure in the minds of credit market traders; of politicians; and today for UK PM Johnson as he meets with the EU leadership. It's intractable so far for them; so how can the rest of us divine the outcome. We have outlined our view that the EU, UK and the US trade will emerge intact from all this (doubting that Brexit will take a worst-case toll); and for the moment even expect trade progress over time. That leaves a question as to 'why' Iran (directly or with a Yemeni smokescreen) would provoke this development now; and the answer might be a 'go for broke' type of mentality, which means Tehran is really feeling the pain of sanctions.     

Overall: as far as emerging from the global challenge, my view tends to continue believing it's the United States that leads, if it manages to avoid unintended conflict and duress. If so it can assist the world out of a morass that evolved for years; not falter as the anti-Western clique of Russian or to a degree Chinese protagonists argue. They don't grasp cooperation; tending to prefer ascension to an 'Eastern-led' hegemony dominated by China and by Russia. The reality is most in Asia and on the sub-continent (and Asia Pacific overall as well as Eastern Europe) really don't want the world dominated by that type of cabal, even as of course the West has made missteps; such as the French allude to.        

Last month French President Macron gave a speech to ambassadors in Paris, during which he alluded to transformations or indirectly even to decline (presumably of Western Civilization, which France led since the era of Enlightenment preceded the rise of British influence).  

Sure, the anti-Western cabal I alluded to probably welcomes policies that in a sense contributed to distortions or disruptions in France (more so than in Germany, which has certain similar concerns). While there is something disturbing about Macron's comments, even as he avoids identifying what policies require modification; they're worth pondering. (Perhaps he's awaiting the Brexit outcome; or perhaps sees himself in a role that offsets what some see as Merkel's decline; at the same time EU leadership relies on combined Franco/German cooperation.)   

It is a topic I've chatted about on my journey; but now that I head home to the U.S., I appreciate both America's leadership role, and a struggle that continues in Europe; as well as intellectual excellence prevailing among some in Europe, that should not be elitist; but be helpful to the EU regaining direction as at times it seems confused (as the Russians or some regional powers of course may wish... and here I'm thinking of Turkey among others); but most be stabilized in a unified way. Maybe this comes up at the United Nations General Assembly this month.   

So guess what gives me optimism for continued American leadership? Oil. And our Energy Independence that I called for over the years. And that has everything to do with my concurrent endorsement of 'electric vehicle' propagation over time.  

It helps make ecological modernization feasible, without surrendering economic hegemony, which suppressing the USA versus China and India, would have mandated. With that mitigated, key trends towards 'climate and ecological improvement' continue and expand; in a sense 'because' they are legislated and mandated by countries like Germany and a little behind, France (Norway at the helm too).    

The other day I mentioned my cousin's (PhD in Ecological Sciences in Berlin) concern about 'coal' production remaining high in the East of Germany. But while it takes time to transition, the trend towards EV's is still welcome. (There is a reticence to embrace 'nuclear' after so many early deaths and cancers that are not reported in the Press stemming from fallout from Chernobyl incidentally; and not everywhere lends itself to embracing 'hydroelectric' power. Here in Germany they also are exploring hydrogen fuel cells as an ancillary source for EV's too. I saw Panasonic, for one, demonstrate it at the IFA show last week.)

Speaking of energy . . Aramco is saying they don't expect production back on track as quickly as some have speculated. I'm not surprised; and I won't belabor the basic debate about the Middle East sto the point that the US (Trump) would not jump headlong into conflict.  

It is not surprising that Aramco says this; because the infrastructure as was attacked (apparently by cruise missiles and drones) is for 'storage' not really production; and not refining. The media is not clear about it; unless I'm missing something; because Saudi Arabia exports Crude of course; not refined products. It's a question of 'storing' oil preparatory to shipment; as they can't flow it (for now) from wells to the tankers. It's really the storage facilities that were decimated; more than oil fields. It is complicated because these tanks separate (vent) gas before tanker shipment; hence they are more than simple storage but not refineries. It's a reconstruction challenge that could take months providing there's not another attack; or a tit-for-tat round of attacks for that matter.   

In sum: we won't underestimate risks; and it's a risky seasonal time of course as well. The 'opinions' as to what happens after a 'response' to the attacks by the Saudi's (with or without direct US action) will relate to how Tehran responds to that; not anyone's opinion about whether or not it results in a wider conflict. If Tehran thinks they can avoid reaction like after shooting down the drone, they are mistaken. Miscalculations do matter here; hence President Trump's calm response is welcomed for now; but we would not presume that means things stay calm.