De-escalation short-lived; Egypt committed to orthodoxy

Hopes of a de-escalation between the US and Iran had been building earlier this week but were quashed by President Trump's address to the nation on Wednesday night. He said that the US would “hit them extremely hard over the next two to three weeks” and that Iran’s power plants and oil facilities were also at risk. And the conflict appears to be spilling over to other parts of the Middle East, with tensions seemingly rising even further between Iran and the UAE and the Houthis now involved. Houthi strikes on the Red Sea, or Saudi pipelines, raise the threat of a more severe slump in Saudi oil production and hydrocarbon GDP. Elsewhere, despite further falls in the currency, Egypt is maintaining its commitment to orthodox policymaking and exchange rate flexibility.