US-Iran tensions could overshadow Washington's trade fight with China

KEY POINTS

• Alastair Newton, director of Alavan Business Advisory and a former British diplomat, predicted more retaliatory actions by Iran this year.
• "I actually think this (Iran) is going to be a more important issue for investors this year than China-U.S.," he said.
• On protests in Iran, Newton said "there should be no doubt ... that authorities will crack down if they feel that the regime is under serious threat."

Protesters hold up a damaged U.S. flag and anti-USA banners during a demonstration following the U.S. airstrike in Iraq which killed a top Iranian commander, in Tehran, Iran, on Friday, Jan. 3, 2020.

Ali Mohammadi | Bloomberg | Getty Images

The U.S.-China trade fight dominated investors' attention for much of 2019 — but that will likely get overshadowed by tensions between the U.S. and Iran this year, a political risk consultant predicted Monday.

"I actually think this (Iran) is going to be a more important issue for investors this year than China-U.S.," Alastair Newton, director of Alavan Business Advisory and a former British diplomat, told CNBC's "Squawk Box Asia."

He predicted more Iranian retaliation this year, after Tehran fired missiles at Iraqi bases housing U.S. troops last week in retaliation for the U.S. killing of top Iranian general Qasem Soleimani.

Newton didn't predict how Iran could retaliate, but other experts have said future moves could include aggression by Iranian proxy groups in the region and cyberattacks.

Newton said the relationship between the U.S. and Iran is "just going from bad to worse," and there have been no signs the two sides could turn to diplomacy to resolve their conflict. His comment came as President Donald Trump tweeted that he "couldn't care less" if Iran agrees to negotiate.

Trump on Twitter: National Security Adviser suggested today that sanctions & protests have Iran "choked off", will force them to negotiate. Actually, I couldn't care less if they negotiate. Will be totally up to them but, no nuclear weapons and "don't kill your protesters."

Tehran wouldn't want to negotiate with Trump either, Newton said.

Iranian authorities "are not going to talk with Donald Trump, the Iranians will hope that Donald Trump is defeated" in this year's U.S. presidential election and they have a Democratic Party administration to deal with, he said.

Iran still a 'significant threat'

Overall, Iran remains a "significant threat" in the Middle East, despite street protests that have broken out after the military admitted it had mistakenly shot down a Ukrainian passenger aircraft, killing 176 people.

"There should be no doubt ... that authorities will crack down if they feel that the regime is under serious threat," said Newton, who pointed out that the current regime has a track record of "ruthlessly putting down protests" and will do so again if necessary.

He also said the downing of the Ukrainian plane could result in a leadership change within Iran's Islamic Revolutionary Guard Corps, paving the way for a younger generation of officers trained by Soleimani to take over.

Soleimani was "a particularly ruthless man" but "outstandingly good" in military affairs, said Newton. He added that the younger officers who have modeled themselves after Soleimani could rise quickly, allowing the elite Quds Force to bounce back.

"I think that Iran's foreign legion ... still poses a significant threat in the region, pursuing Iran's long-standing objectives," he said.