While war in the middle east is always a serious matter, at this point in time, there is no reason to make big portfolio moves based on what we have seen thus far in Iran and Israel. The U.S. is not directly involved and even if we were there likely wouldn’t be dramatic movements in income issues.
The 10 year treasury yield is off just a couple basis points this morning at 4.35%–not much if any ‘flight to safety’–this is somewhat of an indication of what global investors think of the middle east situation.
Unless we see something that is much escalated from what we have seen in the war I plan to continue with my ‘plan’–a slow shift to higher coupon issues. I will know by Sunday evening where I plan to buy next week.
Israel Expands Attack to Include Iran’s Oil and Gas Industry – this is being reported in various news sources as of mid-day Saturday. JMO. DYODD.
Quite an escalation, perhaps meant to deter further attacks on Israel.
Oil futures probably up on Sunday evening. For US oil producers that have been stuck with a low-60s oil price, is this an opportunity to sell future production and improve profitability?
Ryan Sweet of Oxford Economics suggests that every $10/barrel increase in the price of oil raises the inflation rate by 50 basis points. So, in addition to the tariffs, the Fed now has an additional reason to hold interest rates higher for longer.
Yup was waiting for that. Iran produces about 3% of world oil supply. Maybe see oil prices pop $3-5 per barrel? But situation so dynamic now. At this moment on news Iran reportedly through intermediaries has signaled it wants to talk peace. Russia now reportedly wants to talk peace.
Iran has no air defense reportedly. This thing can’t last that much longer. Days? Week or so? Interesting too no reprisals from Hamas, nor Hezbollah that am aware.
The son of last Shah of Iran has been on TV giving interviews about new regime. Am old enough to remember the Ayatollah Khomeini and the news coverage of him in exile during the Iranian revolution, and then flying in from France, (lived in exile in town near Paris), to Iran. Some of this has the same vibe. But we will see.
Iran may produce 3% of the world’s oil but 21% passes through the Hormuz Strait on a daily basis. Closing off the strait would be relatively easy for Iran to accomplish and would have immediate and severe impact to global energy and financial markets. It would be a mistake (imo) to underestimate both Iran’s resilience or its ability to inflict serious economic damage if it chose to.
Closing the Strait of Hormuz (most in Oman not Iran) relatively easy for Iran to do? Simply incorrect. In past could lay mines, or have gun boats attack. But even then skeptical could actually close at least for any extended period of time. And not now. U.S. Fifth Fleet in Oman. Can’t imagine would allow mining or any gun boat activity. China, Iran’s largest trading partner, also does not want any price hike or interruption to flow of oil. Hopefully soon e.g. a week or so, their stockpile of missiles will be gone. However, nonetheless good point, for even threat can spook markets.
Meh…Ansar Allah in Yemen has already shown how easy it is to close the Red Sea to Western commercial traffic. China and Russia still uses the Red Sea while the West does not. Something similar could easily be put in place if need be around Hormuz.
If news correct, was a depot not production facility.
I guess it all depends on what “overly excited” means.
Too me, the issue is whether Iran has the actual capability to meaningfully engage Israel in a war for survival, including the survival of its own ruling party. If Iran doesn’t, it will make some limited retaliation for face saving purposes and agree to a peace that takes away its nuclear capability. Let’s all hope it’s the latter.
WI
Not looking to turn this into a political discussion, but the Iranian leadership views itself differently.
They are looking to eliminate US/Israeli (and Saudi) power in the region and assert the dominance they feel they once had. This is part of why they fuel so many terrorist groups in Syria, Lebanon, Israel/Palestine, Yemen, etc.. and why they pour so much money into a nuclear program they can’t afford.
So, I don’t think they will willingly give up their nuclear program. Period. It is one of the few ways they can project global “power” – by having a bomb. If they were going to give up their program on a logical basis, they would have done so many years ago. It hasn’t happened (despite sanctions, etc.), so it likely won’t happen. Only way I see them giving up the program regime change.
So, they may *agree* to eliminate their program to get out of the current situation, but they will just hide it better.
Destiny (greatness restored) seems to be a common theme among authoritarian regimes.
As a dual US/ Israeli national, I will get overly excited on everyone’s behalf.
I do not think this is close to being over unless Israel has somehow taken away Iran’s ability to enrich uranium.
Losing trader, after the last time Israel bombed their nuclear facilities Iran burrowed deeper into the ground. The old analogy of a deer tick. If bunker buster bombs were used then I would question if Israel already had their own or did they get them from the U.S.
I agree there is no need to panic right now. I also agree with the perspective that you wrote that “The U.S. is not directly involved.”
However, is that the perspective of Iran? The Middle Eastern culture and values, as we learned in IRAQ, are vastly different than ours. I suspect that IRAN may believe we are the world’s single greatest enabler of the action Israel took. Without trying to stir debate, we were not involved in Gaza either. But the people of Gaza blamed the US for arming Israel. Will Iran feel the same or different? Time will tell.
I know some poster is going to respond and say they don’t care what Iran thinks.
It will matter.
But the bottom line – No action for now.
I think the majority citizens of Iran may also think differently than the ruling regime and possibly even welcome the attack, thinking this could be the start of this regime being taken out. Hard to say, but I can’t imagine everyone there wants to nuke the world. No doubt in my mind Israel had inside help.
Even though the market dropped, I had very little change in my portfolio, just a couple holdings that went X today caused most of the drop.
What you said could also be true. I just wanted to share my view that we are not involved. Concurring with Tim, based upon the facts.
However, others whose thinking we have never seemed to be able to understand may believe we are.
It depends on what you call “involved”. The American military is not attacking Iran directly, and as far as I know we have no aircraft or boots on the ground under the American flag. We are definitely involved in helping Israel, both offensively and defensively.
It appears from some press reports that the US is involved in helping Israel intercept Iranian counterattack. US has done it before. So, US appears to be splitting hairs about “direct”.
FWIW, Iranian leadership views everything Israel does (or any western power does against Iranian interests) as an extension of the US. That is how they operate their “empire” – through proxies, so that is how they think about the power of other nations.
Hopefully the spike in the oil price is temporary, otherwise it will certainly feed into the inflation number and affect our bond holdings.
Looking at M2 money supply recent data from Fred, we continue to see continuing uptick https://fred.stlouisfed.org/series/M2SL
One big portion of the M2 money supply is the continuing issuing of liquid Tbills. Year-over-year, the average M2 money supply has grown 4.44%.
Seeing mostly red in my portfolios today- but for some reason am down only $255 – strange.