Trump ties Iran deal to market swings, warns war risked ‘catastrophe’

By Steve Holland and Andrea Shalal

EVIAN-LES-BAINS, France, June 17 (Reuters) – U.S. President Donald Trump on Wednesday defended the interim deal with Iran at a G7 summit in France, saying a prolonged  war in the Middle East could have caused an economic catastrophe.

“I didn’t want to see economic catastrophe. If you kept this going, that could have happened,” Trump told reporters in the lakeside resort of Evian-les-Bains.

The Republican president said he did not want to be like Herbert Hoover, who was U.S. president in October 1929 when the stock market crashed, triggering what became known as the Great Depression.

“All I know is every time we talked about the possibility of peace, the stock market shot up like a rocket ship,” Trump said. “Every time we said something negative, like, guess what, we’re not going to be able to settle, it would go down very big.”

STOCKS GAINED IN ANTICIPATION OF A NEW CEASEFIRE DEAL

The war, which began with U.S. and Israeli strikes on Iran on February 28, has driven up energy prices,  renewed inflationary pressures and stoked economic anxiety. A fresh memorandum of understanding between the U.S. and Iran would pause the conflict while negotiations continue.

Stocks measured by the S&P 500 benchmark gained 4.0% from June 10 through Monday, driven by optimism over the deal. They’ve since given back some of those gains over concerns that the Federal Reserve might raise rates to contain inflation, and following more recent comments by Trump that the war could resume  if Tehran did not stick to its commitments. 

Economists say the peace deal spells good news for the global economy, if it lasts. But they say it could take months for trade flows and fuel supplies to return to normal.

Trump’s comments contrasted with earlier remarks in which he said he expected higher oil prices,  loved inflation and was not motivated “not even a little bit” to strike a deal because of Americans’ financial situation. 

On Wednesday, Trump told reporters that the economy has been resilient, and that he had predicted stocks could have dropped 25% to 30% as a result of the war.

Instead, U.S. forces stopped short of bombing Iran’s oil pipelines, avoiding even more significant economic impact.

“It could have caused an international depression,” Trump said.

(Reporting by Steve Holland and Andrea Shalal; Additional reporting by Daphne Psaledakis and Trevor Hunnicutt in Washington; editing by Michelle Nichols, Deepa Babington and Sanjeev Miglani )