LOOK AHEAD: Thursday Data Calendar: Wkly Claims, Trade Bal, Imp/Exp, Fed Speak

US President Donald Trump has spoken on Iran ahead of a Medal of Honor ceremony at the White House. LIVESTREAM. Trump says that the US is "still carrying out large-scale operations." He justifies military action because Iran "refused to cease its nuclear aspirations" and Iran's ballistic missile programme "acted as a shield" to its nuclear weapons programme. 

• Trump: "For almost 47 years, this regime has been attacking the US... This was our last best chance to strike and eliminate the intolerable threats posed by the regime..."
• He later adds, "we will easily prevail" and says the US "already substantially ahead of its time projections." Adds that the US will do "whatever it takes."  He says, "we projected four to five weeks but have capability to go far longer. We'll do it. I don't get bored. There's nothing boring about this."
• Trump says the US objectives are clear: "First, we're destroying Iran's missile capabilities... and capacity to produce brand new ones... "
• Trump continues, "Second, we're annihilating their navy. Third, we're assuring that the world's number one sponsor of terror can never have a nuclear weapon. And finally, we're ensuring that the Iranian regime can not continue to arm and fund terrorist armies outside their borders."

Bloomberg News reports "The United Arab Emirates and Qatar are privately lobbying allies to help them persuade President Donald Trump to reach for an off-ramp that would keep US military operations against Iran short". 

• BBG: "The countries are seeking to build a wide coalition to advance a swift and diplomatic end to the conflict, the people said, in order to prevent regional escalation and a prolonged energy price shock."
• One of the major concerns for both countries, in addition to the impact on energy markets and their perceptions as 'safe havens' in an unstable region, is their dwindling reserve of air defence capabilities to counter Iranian missiles and drones.
• As noted earlier (see MIDEAST: US Confirms Jets Downed Over Kuwait By Friendly Fire), the asymmetric cost of attack vs. defence when it comes to airborne strikes (see analysis from Kelly Grieco at the Stimson Center think tank here), estimated at USD~177–360mln for Iran's drones and missiles to USD~1.45–2.28bln for the UAE's aerial defences alone, combined with a much longer lede time to build more interceptors compared to drones means significant risks for the Gulf states if Iran engages in a prolonged barrage. 

French President Emmanuel Macron and German Chancellor Friedrich Merz have released a joint statement announcing the formation of a "a high-ranking nuclear steering group" that intends to act as a framework for dialogue and cooperation related to a pledge to "to enter into closer cooperation in the field of deterrence in response to the evolving threat landscape." This will see "German conventional participation in French nuclear exercises and joint visits to strategic sites as well as development of conventional capabilities with European partners."

• The cooperation "based on the shared understanding that the nuclear dimension of deterrence remains a cornerstone of European security, relying on US extended deterrence, including US nuclear weapons forward-deployed to Europe, and on the independent strategic nuclear forces of France and the United Kingdom, which have a deterrent role of their own". The statement claims cooperation  "will add to, not substitute for, NATO's nuclear deterrence and NATO's nuclear sharing arrangements".
• The statement comes alongside an announcement from Macron that France would be increasing the size of its nuclear arsenal, arguing that a more aggressive Russia, China's rising military power, and uncertainty over the US' commitment to NATO collective defence mean that "An increase of our arsenal is indispensable".
• Bruno Tertrais at the FRS think tank cites the speech as "the most significant update to French nuclear deterrence policy in thirty years".
• Unlike the UK's nuclear arsenal, which is reliant on US technical cooperation, France's sea and airborne nuclear deterrent can be operated independently from Washington, D.C.