Oil Stocks for the War Rally
You’re probably aware that a few high-level Iranian military officers were killed in an airstrike on the Iranian embassy in Syria a couple of weeks ago.
Israel hasn’t taken credit, but it’s pretty obviously part of Israel’s war against Hamas – because Hamas is backed by Iran, as are Hezbollah and the Houthis. The U.S. has tried to reassure Iran that it did not know about the embassy attack.
You probably also know that a couple of days ago, the U.S. warned Israel of an imminent “significant attack in Israel” by Iran.
Reuters quotes a source saying that Iran has “been very clear” that its response to the attack on its Damascus [Syria] embassy compound would be “controlled” and “non-escalatory” and planned “to use regional proxies to launch a number of attacks on Israel.”
So, Iran has its proxies fighting Israel – and the Western world via the Houthis attacks on any ships that aren’t Russian or Chinese. And as a U.S./EU proxy, Israel has expanded the scope of its war.
This is weird stuff. If it were just the Middle East, we might say, well, there you go. But it’s not just the Middle East. It’s also Ukraine.
Russia may not be an Iranian proxy. However, it is getting much assistance from Iran and China in its war against Ukraine.
Ukraine may not have been a U.S./NATO/EU proxy when Putin invaded but it pretty much is one now.
Like in the Middle East, the flashpoints for this conflict may be regional, but there should be no doubt it’s the U.S. and Europe vs Iran, Russia, and China.
I’m not a geopolitics expert. I’m an investor. Even though the financial media is obsessed with the stock market risk that inflation and the Fed are creating, I can tell you that geopolitics are impacting the stock market right now.
How to Invest for War
It’s not a coincidence that the Volatility Index (VIX) is spiking 25% today. It’s a Friday. If the “imminent” threat of some kind of strike on Israel turns out to be this weekend, then today was the day to get positioned – you can’t trade stocks, options, or oil over the weekend.
It’s also worth noting that volatility picks up ahead of turns for the stock market.
The VIX was over 22 when the S&P 500 was bottoming in late October last year. And it’s headed to that level again.
On Wednesday, my fellow editor Christian DeHaemer wrote that we are at the start of a super cycle for “things you can drop on your foot” — as he so eloquently called commodities. Armed international conflict is another major catalyst for commodities.
Precious metals and probably even Bitcoin will have their place as safe havens. But please note that investors’ first move when things get dicey is to go to cash. The safe havens can wait a day or two.
Oil is an outright necessity. It and Apple (NASDAQ: AAPL) are the only assets on my entire screen that are trading higher today.
Oil is trading around $85 as I write. It was $95 last September and $120 in June of 2022.
On March 4, I recommended Devon Energy (NYSE: DVN) at ~$45 to you. The stock is hitting $54 today, and with a forward P/E of just 10, there’s probably more upside coming.
Chief Investment Strategist
brit.ryle@protradertoday.com
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