JACKSON HEWETT: Could Iran and cheaper oil be the goal of Donald Trump’s Gaza gambit?

Fresh off a game of non-consensual Russian roulette with his nearest and dearest neighbours, Donald Trump has taken aim at a new target.

His proposal to take control of Gaza is clearly preposterous. Even if he convinced Americans to spill blood and treasure building a Mediterranean resort, only the bravest tourist would dare stay.

After the will-he-won’t-he tariff farce that had markets gyrating, investors are already immune to Trump’s trial balloons.

In the hours after Trump’s announcement, oil, which should be a barometer of how worried markets are about a blow-up in the Middle East, barely rippled. In fact prices drifted lower.

But is there a hidden agenda behind Trump’s temerity?

Trump has always favoured the most extreme opening in any negotiation, said Michael Feller, a former diplomat and chief strategist at advisory firm Geopolitical Strategy, who thinks the Gaza gambit is a way to test the position of Israel’s neighbours.

“He sees everything as a boardroom negotiation. He builds up the tension, he tests limits. He wants take them right up to the edge and see the whites of their eyes. Then he’ll know what his next move needs to be,” Mr Feller said.

For 70 years, US presidents have sought a Middle East peace legacy. Trump may be using this tactic to pressure Saudi Arabia into recognising Israel as an extension of the Abraham Accords.

But Mr Feller believes there might be a bigger target: Iran.

More specifically Iran’s oil.

Americans are on an inflationary highway to hardship if the President’s tariff raising, tax cutting agenda comes to fruition. Elected on a mandate of bringing costs down, Trump sees a flood of new oil as the answer to his problems — keeping inflation in check and clearing the path for interest rate cuts.

Trump is frustrated that neither OPEC nor his own producers will do his bidding.

Despite his exhortation to ‘drill baby drill’ American frackers haven’t cracked. Having been bankrupted in the heyday of the shale boom, they are very happy with a price of $US72 a barrel, thanks very much.

Saudi Arabia remains unmoved. With costly prestige projects and an expansive welfare program, the Kingdom needs $US90 a barrel this year to balance its budget, according to the IMF.

Iran pumps 3.3 million barrels per day, exporting to China mainly in yuan via intermediaries, bypassing the dollar and U.S. oversight. The trade undercuts US currency dominance — another of Trump’s grievances — and tightens global oil supply

Prior to his meeting with the Israeli prime minister, Trump reinstated his ‘maximum pressure’ campaign on Iran, aiming to ‘drive Iran’s oil exports to zero’ to block its nuclear ambitions. Yet, he signalled openness to talks with Tehran’s leadership.

Mr Feller thinks Trump’s Gaza comments could be part of that negotiating tactic to get the Iran’s oil flowing on open markets again, which fits with a reported meeting between Elon Musk and Iran’s ambassador to the UN in November.

“I half expect he’s going to build this tension in order to, in a few weeks, say, ‘I’m meeting with the President of Iran, and we’re going to do a deal,’” Mr Feller said.

“Iran already is pumping the oil. It’s just on the black market but by bringing it into the US dollar market, that would take away any fears of a BRICs (Brazil, Russia, India, China) currency emerging to rival the US dollar. It would be the ultimate deal that Trump can put into his trophy cabinet.”

Trump may have a broader strategic oil goal beyond domestic concerns.

Trump’s envoy on Ukraine and Russia believes the way to break Putin’s stronghold, would be bring the oil price down to $US45 a barrell.

“It would completely undercut Russia. People think of Trump as being pro-Russia, I don’t think that’s the case,” Mr Feller said.

“He’s pro himself, and if he can undercut Russia, and bring Putin to the negotiating table on Ukraine, the way to do that would be to crush the oil price by 30 bucks.”