Investing in Geopolitical Rumors: No Longer If, But When
By Ian L. Cooper
When it comes to a military standoff with Iran, it may no longer be a question of if, but when. And the market is well aware of that. In fact, for a brief period in after-hour trading Tuesday, oil broke above $68 on a rumor. That’s how nervous the market is about the reality of another war in the oil-rich part of the world.
According to reports, that brief $5 jump was sparked by sweeping rumors that Iran had attacked a U.S. ship engaged in Persian Gulf war games. But it was just that… a rumor, a bad one at that. Fortunately, that spike was short-lived after the U.S. government denied the report.
Any military blowup in this part of the world is sure to spike oil again. Here’s a country located along the Strait of Hormuz, which a big chunk of the world’s oil is shipped through. The Street worries that any conflict could disrupt that supply.
Plus, there’s concern for the safety of the 15 British troops that were seized last week by Iranians in the Gulf. That’s only serving to stir the emotions of Tony Blair who says the situation is now entering a “different phase.” That Blair comment alone was enough to initially validate the Iranian attack rumors.
The power of even an absurd rumor is strong enough to send shockwaves through the oil market. This is just proof of how foolish it is to go short oil right now. In fact, we’re looking for oil to push toward $70 as fears remain over Iran, and as we head into the busy driving season. Keep an eye on the OIH and the XLE as plays on Iran.
Take care,
Ian L. Cooper, Editor, Early Alert Trader
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