Largest Bomb in U.S. Arsenal Could Make Economic Waves

GBU-43/B, also called “mother of all bombs” or MOAB, has been dropped in Afghanistan, marking a dramatic change in the way the current administration plans to conduct operations in the area. While the weapon was planned for use on the Iraqi battlefield, it was never used as there was limited resistance there. The bomb was likely dropped in response to the death of a U.S. special forces operative in the same area.

While the United States has access to much larger bombs thanks to its nuclear arsenal, this is its largest one; it currently consists of conventional explosives. As a result, there is no fallout, but its effects last for about a mile. The MOAB was dropped on April 13, 2017 in an area filled with complex tunnels and caves in the Nangarhar province, close to the border of Pakistan.

Potential Economic Fallout

As with the Syrian missile launch only a week ago, this represents a hardening of U.S. military policy, which can have significant effects on the stock market, the currency markets and the markets for oil and other fossil fuels. This particular event will likely have limited ramifications, as the battle against Al Qaeda and later ISIS-K has been ongoing in the area for more than a decade. Nevertheless, the deployment of this weapon in combat shows that the current U.S. administration is prepared to take a decidedly harder line in such situations — something that could spur uncertainty economically.

This MOAB weapon is also a shock-and-awe device. Carpet bombing with much smaller and cheaper munitions is extremely effective against complexes, particularly from high altitude, and stand-off munitions such as rockets and Paveway laser-guided bombs can be used with very high precision (typically within an inch on target). The use of such a massive ordinance is likely designed to send a point across to various threats both in the region and elsewhere.

Some may see it as a statement against Russia, who could see this first use as a threat to their ambitions in the region. The administration’s statements against Assad, combined with the recent missile strike, could enhance the view that there is a threat to that nation. With North Korea’s recent rhetoric, it’s plausible that it could also be sending a message to that country. Visible displays of military power show the world that the United States is not above making a point. However, military action often results in instability in global stock markets due to the increased number of refugees and a reduction in economic expenditure in the target countries.

Similarly, threats of military action in the near East and Middle East often result in higher oil prices. While this may be offset by the increased oil reserves in the United States, it still has a notable effect, driving increased economic uncertainty — especially in niches such as transportation. In times of instability, tangible asset investments like gold come to the fore. When military action grows more likely, precious metals can act as a useful hedge against sudden oil and other financial shocks.