While an Israeli-US air strike on Iran this summer is unlikely some sort of US-NATO intervention in Syria - no fly zone, humanitarian corridor, missile strikes - is conceivable. It could be done without UN authority as in Serbia-Bosnia. A Syria-Iran response, perhaps covert sponsorship of shia unrest in Bahrain and Saudi Arabia- would raise the price of oil. But could this be a desirable outcome for US policymakers? The US economy is recovering. If it continues to do so capital with flow out of Treasuries into riskier assets, reducing bond prices and therefore raising interest rates on Government debt. The US can't afford a rise in borrowing costs. An oil price spike that stalls the US recovery by raising energy costs would dam up money in treasuries through safe haven investment demand. This presumably helps the Fed by reducing the amount of asset purchases needed to keep rates low. It also gives the Fed a context in which the impact of its policy measures can be maximised, with the softening effect of further QE on a strengthened dollar benefiting US exporters and US multi-nationals.
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