Markets are getting antsy again about the possibility of a US strike against Iran. Oil, which had been cruising steadily towards the sub-$50 a barrel range, has climbed again, in part on fears that a new war in the Middle East is brewing. The jitters have not affected currencies, equities or interest rates yet, but you can be sure they will follow if the present level of tension rises.

Even as investors consider their positions ahead of a deepening crisis, there is a general air of incredulity that the United States might be thinking along military lines. Given the debacle in Iraq, isn’t it unimaginable that America would open a second front in a hostile region? It is important to remember that whatever is being contemplated for Iran in the recesses of the Pentagon is not even close to a rerun of the Iraq war — which, of course, has gone so swimmingly. No one in his right mind is thinking about an invasion; targeted strikes against nuclear facilities are a different matter, however.

There have been clear indications of late that the White House plans to bring the issue to a head in the next year or so. The deployment of heavy military hardware to the Gulf, suitable for launching stand-off air strikes, the appointment of an admiral to take over the usually land-based Central Command and the increasingly minatory language the Bush Administration has been using about Tehran’s activity in Iraq all clearly suggest something is up.

From what I can gather from people involved in the discussions, there are at least five reasons why some sort of action is more likely than it was a year ago.

First, time is fast running out on President Bush. He is an increasingly isolated political figure.

This seems counterintuitive. Surely the weaker a president is politically the more likely he is to avoid taking big, bold and risky actions such as dropping missiles on the Middle East’s largest Islamic nation?

Maybe not. From his recent decisions on Iraq, where he seems determined to risk total political isolation in going for broke, I’d say Mr Bush has reached a sort of psychic calm now. He knows he is leaving office a controversial president and he is now almost entirely focused on his legacy, rather than his immediate political prospects. No amount of pleading from Republican pollsters telling him a botched attack on Iran would doom the party for decades is going to shift him if he thinks that the gauntlet has to be laid down.

Second, the sanctions effort has yielded a mouse, to no one’s great surprise. Thanks to the obstinacy of Russia and China, not to mention their powerful financial interests, the UN process produced only limited sanctions on nuclear-related exchanges. Although Moscow and Beijing insist they be given time to work, it is hard to see what’s the point.

Third, despite last week’s intelligence reports that painted a bleak picture of the situation in Iraq and cast doubt on the notion that Iran was creating trouble there, the White House believes more firmly than ever that Tehran is conducting a proxy war. Iranian agents are supplying Shia militias and the Shia-led Government in Baghdad is increasingly cosying up to its Persian friends.

US military advisers are alarmed that Iranian influence may be reaching a point from which it will be impossible to stop Iraq becoming a client state.

Fourth, the events in Israel and Lebanon last summer have hardened Israeli opinion about the inevitability of a confrontation with Iran. This is not by any means a clincher for US policy, as the more fevered observers of US politics will have it. But White House foreign policy thinkers share the generally gloomy Israeli view that the region is now in the early stages of a long struggle. The Hizbollah-Israel fight last summer was merely a taster. Imagine having to do it again against a nuclear-armed power.

Fifth, as far as I can tell from the dimly lit corners of the intelligence world, reliable information about the location of Iranian nuclear facilities and confidence in the feasibility of taking them out with some kind of coordinated military action have both improved.

The visibility of the progress of a regime towards nuclear weapons can be thought of as a spectrum. At one end, the most basic, is scientific knowledge. This is, by its very nature, extremely hard to detect through intelligence operations. At the other end are nuclear-tipped missiles sitting in silos somewhere, deadly, certainly, but very difficult to conceal. As Iran has moved along that spectrum, American and Israeli Intelligence believe that they have a better grasp of what is there and where it is.

Does all this make a strike inevitable? No. US officials believe Iran may be getting so alarmed by the prospect of a conflict that it is preparing to make some important concessions. Mahmoud Ahmadinejad, the millenarian loon who runs much of the Iranian Government, is under strong pressure from rivals to ease off.

In the near future Iran is expected to come up with some sort of “compromise”, perhaps agreeing to suspend its enrichment processes in exchange for the lifting of sanctions.

The US will be tempted to regard that as a victory, a triumph for its tough diplomacy. But only if it really disarms Iran can it be taken seriously. Expect the outlook to get even murkier in the months ahead.

gerry.baker@thetimes.co.uk

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