The surprise attack by Hamas on October 7 has been likened to Israel’s Pearl Harbor or 9/11 moment. The former resulted in the atomic bombings of Hiroshima and Nagasaki. The latter led to the wars in Iraq and Afghanistan. How will Israel respond? Israeli Prime Minister Benjamin Netanyahu has promised to take “mighty vengeance.” 

The big picture: Before October 7, there were weekly domestic protests against Netanyahu’s overhaul of the judicial system, while elite IDF reservists and Air Force pilots announced that they would no longer serve in the reserves due to the government’s policies. 

Now the calculus has changed. 

“Citizens of Israel, we are at war,” said Netanyahu. “Not an operation, not a round of fighting, at war!” He added it will be “long and difficult” and continue with “neither limitations nor respite until the objectives are achieved.”

Question: What are the objectives?

Flashback: On May 14, 1948, Israel was officially declared an independent state with David Ben Gurion as the prime minister. “A Jewish state on only part of the land is not the end but the beginning,” he wrote to his son. “We must expel Arabs and take their place.”

After the six-day Arab-Israeli war in 1967, Israel took control of the Gaza Strip and the West Bank, taking East Jerusalem from Jordan, the Sinai Peninsula from Egypt, and the Golan Heights from Syria. Confronting feeble Arab opposition, Israel continued annexing more Palestinian territory and expanding Jewish settlements. 

Details: To fulfill the Abrahamic covenant, Israel requires full control of Jerusalem. There can be no Zionism without Zion—a biblical synonym for Jerusalem. The most urgent challenge is to expel Palestinians, who make up 38 percent of the city’s population. 

This is being done by revoking residency rights, forcing evictions through various legal mechanisms, redrawing of municipal boundaries, and making life as uncomfortable as possible. This process will now accelerate.

Once that’s done, years into the future, Israel will seize control of the Temple Mount in the Old City, which is the holiest site in Judaism. Orthodox Jewish tradition maintains it is here that the Third Temple will be built prior to, or in tandem with, the arrival of the Messiah.

What else: In Jeremiah 4, we are told that Elam—an ancient civilization centered in the far west and southwest of modern-day Iran—will come under the judgment of God for conspiring to launch an attack against Israel in the “latter days.” 

If Iran goes nuclear, it will dramatically change the geopolitical standing in the Middle East, returning Israel to a real existential fight for its survival. Israel lives with this security dilemma.

Context: This is what Netanyahu said at the United Nations last month. 

“Ladies and gentlemen, over three millennia ago, our great leader Moses, addressed the people of Israel as they were about to enter the promised land. He said they would find their two mountains facing one another. Mount Gerizim, the site on which a great blessing would be proclaimed, and mount Ebal, the site of a great curse.

Moses said that the people’s fate would be determined by the choice they made between the blessing and the curse. That same choice has echoed down the ages, not just for the people of Israel. But for all humanity. We face such a choice today. It will determine whether we enjoy the blessings of a historic peace, of boundless prosperity and hope, or suffer the curse of a horrific war of terrorism and despair. 

When I last spoke at this podium five years ago, I warned about the tyrants of Tehran. They’ve been nothing but a curse, a curse to their own people, to our region, to the entire world. But at that time, I also spoke about a great blessing that I could see on the horizon. Here’s what I said: “The common threat of Iran has brought Israel and many Arab states closer than ever before in a friendship that I have not seen in my lifetime.”

Rest assured, the fanatics ruling Iran will do everything they can to thwart this historic peace. Iran continues to spend billions to arm its terror proxies. Iran’s drones and missile program threaten Israel and our Arab neighbors and Iran’s drones have brought death and destruction to innocent people in the Ukraine. This tells you all you need to know about Iran’s murderous intentions, and Iran’s murderous nature. 

Yet the regime’s aggression is largely met by indifference in the international community. Eight years ago, the Western powers promised that if Iran violated the nuclear deal, the sanctions would be snapped back. Well, Iran is violating the deal. But the sanctions have not been snapped back. As long as I’m Prime Minister of Israel, I will do everything in my power to prevent Iran from getting nuclear weapons.”

During his speech, Netanyahu brandished a map of the Middle East that showed the West Bank and Gaza as part of Israel.

Between the lines: The public narrative is that Hamas attacked Israel to disrupt the Saudi-Israeli normalization effort. We think more important is Israel’s insecurity with the landmark Saudi-Iran peace deal. Netanyahu cautioned Saudi leaders that “those who partner with Iran partner with misery.”

Iran is thought to need only weeks to produce enough highly enriched uranium to fuel a nuclear bomb, although it could take considerably longer to produce a working weapon.  

Our concern: Netanyahu lobbies the world that Iran had a direct hand in the planning of the attacks on October 7, prompting Israel to attack Iran which ignites a pandemonium.

So far this is not the case. Iran has issued denials and the US has said it has no direct knowledge of Iran being behind the attack. Israeli military has not found concrete evidence of Iranian involvement but it is still investigating. 

Get smart: No one in the region wants the situation to escalate, including Iran.

Iran has freed American prisoners in the past month, the US has unfrozen $6 billion of Iranian funds, and the US has relaxed enforcement of sanctions on oil sales, allowing Iran to export more crude to China that it has in ten years. 

The IAEA has found that Iran has slowed its high-level enrichment, with the Iranian leadership willing to discuss potential limitations on its nuclear work with world powers.

Attention: Even if Israel and Iran going to war is only a remote probability, we cannot dismiss this worst-case scenario. After the 9/11 attacks in 2001, it took eighteen months to build a fabricated case for the Iraqi invasion.

Netanyahu may have strained relations with the US, but now President Biden has issued a blunt warning, “Israel has a right to defend itself and its people, full stop.” Germany, Italy and the UK have expressed support of Israel’s right to defend itself “as much as it takes.”

Go deeper: The Middle East is undergoing a major transformation, but it is still entirely possible to know exactly what will happen in the future. The Abrahamic religions display certain convergences in the field of eschatology. Maktub. It is written.

As for markets, this is just another brick in the wall. Stay bullish and let price guide you.