by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with an analysis of the US pressure campaign on Iran, then examines the growing concerns surrounding private credit firms. We next explore signs of a “New Monroe Doctrine” emerging in South America and discuss speculation over the ECB president’s potential departure. We also include a summary of key economic data from the US and global markets.

Iran Pressure: While talks between the US and Iran over Tehran’s nuclear program are ongoing, the stakes for reaching a deal are rising. President Donald Trump warned on Thursday that Iran has “10 to 15 days” to agree to terms on its nuclear program, sharpening the diplomatic deadline. Adding further fuel to tensions, Washington has ordered its largest military buildup in the Middle East since the Iraq war, a move widely seen as preparation for potential action if diplomacy fails. The heightened military posture has increased the risk of open conflict.

• The latest US moves appear aimed at signaling to Iran that it has limited leverage at the negotiating table. The renewed talks are reportedly centered on Iran’s ballistic missile program, which Tehran sees as essential to its regional power projection, but which neighbors view as a serious security threat. Iran has indicated that it is unwilling to give up these capabilities, yet Washington seems intent on testing whether that position can be softened.
• That said, it remains unclear what level of force the US is prepared to employ against Iran. Reports suggest the administration may be favoring a limited strike as a catalyst to advance diplomatic talks, an initial attack could occur within days that would likely target military and government sites. Should that prove insufficient, the strategy could escalate into a broader campaign aimed at regime change.
• The threat of a potential conflict has already drawn international involvement. Russia has vowed to respond to any new US strikes against Iran, while both Moscow and Beijing have initiated joint military exercises with Tehran. These maneuvers, aimed at ensuring operational readiness, signal that both powers could provide strategic support should a full-scale conflict with the US erupt.
• While we remain cautiously optimistic that a full-scale conflict can be avoided, the margin for miscalculation remains high. Although Iran lacks the leverage to dictate terms, the US has little appetite for a repeat of the Iraq War — a scenario that could mirror the chaos of a potential regime collapse in Tehran. Given this backdrop, we believe rising geopolitical uncertainty will provide a significant tailwind for commodity prices and precious metals.

Private Credit Concerns: Financial stability concerns around private credit have intensified following fresh restrictions at a major debt fund. On Wednesday, Blue Owl permanently restricted withdrawals from its retail-focused private credit vehicle, underscoring mounting anxiety over weakening consumer loan performance and significant exposure to software companies seen as vulnerable to AI-driven disruption. Despite the recent scrutiny, there is little evidence so far that private credit funds are being forced into large write downs on their assets.

• That said, there is likely to be growing concern about the broader private credit market, increasing the odds that it becomes a target for tighter oversight. Recent commentary from Senator Elizabeth Warren and other lawmakers has emphasized the need for stronger safeguards around complex non-bank lending, while recent Fed meeting minutes flagged vulnerabilities in the “opaque” private credit sector and its exposure to higher risk borrowers.
• For now, we assess the risk of a private credit bubble triggering broad market turmoil as low. Yet, we doubt this is the last we will hear of underlying vulnerabilities, given the trajectory of consumer credit delinquencies and the structural threat AI poses to established players. Although we expect any fallout to be limited in scope, we believe increased international exposure could serve as a useful hedge against potential vulnerabilities in the US and technology sectors.

New Monroe Doctrine: President Santiago Peña of Paraguay has emerged as a supportive voice for US policy in South America. He characterized US actions regarding Venezuela as a necessary, if imperfect, step toward restoring democracy and expressed confidence in the country’s democratic prospects. Peña has also backed US stances on Israel and anti-cartel operations. These statements support our thesis that the United States is actively seeking to solidify its regional footprint and counter China’s deepening influence.

Lagarde to Stay? ECB President Christine Lagarde has pushed back against speculation that she could step down before her term expires in 2027, telling the Wall Street Journal that her baseline is to serve out her full mandate. While she stopped short of categorically ruling out an early exit, her comments suggest no decision has been taken to leave ahead of schedule. Any premature departure would give EU leaders a chance to install a successor who is likely to focus on preserving the integrity of the currency bloc while reaffirming the ECB’s commitment to price stability.

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