In a move that has sent ripples through the markets, the UK has secured a breakthrough in the Iran nuclear deal, with international inspectors now guaranteed access to key military sites. The pound sterling reacted with a sharp rally against the dollar, as traders priced in reduced geopolitical risk. But let's not get carried away.
This is a diplomatic coup, certainly, but the real story is the cost. The Treasury will be footing a hefty bill for the monitoring apparatus, and the chaps at the OBR will be sharpening their pencils. The fiscal hawks among us will note that this is yet another example of government spending dressed up as foreign policy success.
Still, the gilt market took it in stride, with yields edging lower on the back of the safe-haven bid. For now, the City is breathing a sigh of relief. But the devil, as ever, is in the details.
Will the inspections actually hold? The history of such agreements suggests a certain fragility. Investors should remain vigilant, for capital flight is an ever-present spectre when dealing with regimes of questionable reliability.
The bottom line: this is a positive for global stability, but the market's skepticism is warranted. The UK's diplomatic heft has been restored, but the fiscal consequences will be felt for years.
