U.S. and Israel Consider Attacks on Iran’s Economy

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Luke Vargas (0:20)

President Trump pledges to destroy Iran's power plants unless it opens the Strait of Hormuz. Plus, Jamie Dimon warns of an inflation run-up stemming from the war, and the Trump administration goes to bat for American cheese makers raising a stink in Europe.

Jon Emont (0:36)

The United States government has probably never really taken this level of consistent action to try to make sure that American cheese makers are not discriminated against in international markets.

Luke Vargas (0:47)

It's Monday, April 6th. I'm Luke Vargas for The Wall Street Journal, and here is the AM Edition of What's News, the top headlines and business stories moving your world today. President Trump is due to hold a press conference on the Iran War this afternoon, likely detailing the rescue of an American aviator who had been trapped in Iran for more than 36 hours and potentially providing an update on diplomatic dealings with Tehran. In an interview with Fox, Trump reportedly said that the US could reach a deal with Iran as soon as today, even as he threatens to escalate the conflict. Trump has given Iran until Tuesday evening to reopen the Strait of Hormuz and saying that hell will rain down if they don't. And in an expletive-laden follow-up post yesterday, he promised to destroy Iran's energy sites and bridges if the waterway isn't opened. Correspondent Dov Lieber said the warning comes as both the US and Israel have drawn up plans to shift the war into a new phase that's focused on striking civilian infrastructure.

Dov Lieber (1:47)

The Israelis tell me that they have plans to hit Iranian energy facilities. That's something that they promised they would hold off doing after Trump asked them to follow a strike on Iranian gas field. But now they've got new plans and they're waiting for permission from Washington to hit those energy facilities. And what's happening here is that both the United States and Israel are looking for a new type of leverage, a leverage they haven't been able to gain by going after pure military sites. The US has conducted talks with Iran, but those don't seem to be going very well. And I think the two sides are hoping that by striking these infrastructure sites, they will be able to increase the pain on the Iranian government and hopefully buy themselves some leverage.

Luke Vargas (2:26)

Both US and Israeli officials have brushed off concerns that attacking civilian infrastructure risks violating international law, saying they're legitimate targets because they produce material used by Iran's military. However, Dov told me that pulling the trigger against civilian targets risks putting economic facilities of importance to the US and its allies in the crosshairs.

Dov Lieber (2:48)

There's no guarantee that even if Israel and the United States hit all these sensitive energy sites and infrastructure that the Iranians are going to give up anyway, and the Iranians are promising to retaliate in kind across the region in a way that will seriously affect the regional economy as well as the global economy potentially for many months or years to come. And so we're getting into a new type of escalation here where there can be a lot of economic pain on both sides and it's not clear whether that will actually bring us to a resolution either way.

Luke Vargas (3:17)

In addition to warnings from Iran's military, an Iran-backed militia in Iraq has pledged to attack energy infrastructure across the Middle East should the US try to open the Strait of Hormuz by force, according to a statement posted by Iranian state media. Meanwhile, Japan appears to be hoping that diplomacy can help unblock its oil exports trapped in the Gulf, with Prime Minister Sanae Takeiichi saying that her government is seeking talks with Tehran to secure the release of vessels stuck in the vital shipping lane. She added that she wants to see all vessels released from the Strait regardless of their nationality, though it's an outcome that appears increasingly unlikely without a change in direction from Iran. Its Revolutionary Guard Corps Navy said yesterday that it's working to enforce a new security order in the Persian Gulf and that the Strait would quote never return to its previous condition. Here was correspondent Suna Rasmussen.

Suna Rasmussen (4:12)

The biggest unknown in this of course is Iran. And I think a lot of shippers and insurance companies will not be willing to take on the risk of resuming shipping in the Strait if they don't have guarantees from Iran that Iran will not fire at ships. So in a sense it's also up to Iran to declare when the war is over. The US is definitely the dominant military power here, but Iran has the ability to escalate things in the Persian Gulf and in the Strait of Hormuz. And as long as Iran doesn't agree to cease hostilities or to cease threats against ships going through, well, then the uncertainty remains for international shippers. A very important factor is going to be the amount of international pressure that's put on Iran. And China is a major customer of Middle Eastern oil and is also an important economic partner and political partner of Iran. So going forward, I would definitely be watching for whether China steps up and is willing to exert enough pressure on Iran to get this problem solved.