Investor Insights:
- Analysts are worried about the U.S. strike that killed Iranian General Qassem Soleimani.
- President Donald Trump said he’ll respond aggressively if U.S. citizens are killed in Iran retaliation.
- However, the short-term risks are lower than the media portray.
I learned an important lesson while sitting inside a mountain in South Korea.
I was there with the Air Force. Our command post was hidden from the world and protected against nuclear blasts.
We were watching a North Korean military exercise. Tens of thousands of troops were moving closer to the border every day.
The military leadership was convinced war was near. We needed to increase our readiness, they argued.
Then suddenly, the advance stopped.
According to official assessments, the troops stopped because North Korea was trying to trick us. That was logical from the experts’ perspective.
From the back of the room, I asked a simple question: “What if they just ran out of gas?”
The Army colonel showed visible levels of irritation. He said that wasn’t a question worth answering. I nodded and got to work increasing readiness.
Weeks later, the official analysis indicated the exercise ended when North Korean forces ran out of gas.
It turned out that North Korea wasn’t as big a threat as feared.
Today, analysts are worried about the U.S. strike that killed Iranian General Qassem Soleimani.
There are reasons to worry in the long run. But today, traders should put Iranian worries aside.
Iran Through an Open Mind
If a country targeted a U.S. general, our military would respond forcefully.
The problem for Iran is large-scale responses are costly. Iran doesn’t have billions of dollars to devote to attacks.
Iran could mount a small attack against neighboring countries. Or it could sponsor terrorist operations against U.S. targets.
But President Donald Trump said he’ll respond aggressively if U.S. citizens are killed. Iranian officials are now forced to factor that into their decisions.
What happens next? Iranian authorities will respond rationally, from their perspective.
How Iran’s Leaders Will Respond
Iranian leaders’ overriding goal is the survival of their regime.
They would like to expand their reach. But if push comes to shove — and it did — survival is prioritized over expansion.
This tells me Iran’s response will be small.
Expect some cyberattacks. There’s already been one.
The Federal Depository Library Program website was hacked on Saturday.
That’s a rather futile response. But more important government websites are more secure. Iran’s attacks will be limited to what’s vulnerable.
Tensions could flare in the Middle East. Iran can attack its neighbors.
That’s a significant risk. But it’s a short-term risk.
Iranian aggression could spike oil prices. But China needs cheap oil from the Middle East and will quickly move to calm markets.
Terrorist attacks are also possible. But they carry a high price.
U.S. forces have exacted heavy tolls on terrorist organizations. Iranian leaders are unlikely to risk their survival to claim a small attack.
Iran Is out of Gas
I don’t want to sound complacent. There are risks. But the risks are lower than the media portray.
Iran is out of gas. It will make noise, but can’t do much more.
Stock markets will react to earnings rather than this event. By the end of the month, analysts will be searching for the next big story as they forget about Iran or any Iran retaliation.
Regards,
Editor, Peak Velocity Trader
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