Warning: Oil Prices Will Soar on September 5
- Iran announced it will start enriching uranium on September 5.
- There might be military intervention to stop Iran from building nuclear weapons.
- Global tensions could cause a market crash.
I know the exact date to start worrying. And I’m wondering why no one else is paying attention.
This isn’t a secret date I discovered. The story is in the news. I have known about this date since July.
That’s when Iran announced it will start enriching uranium.
The country can make uranium pure enough to build nuclear weapons. It announced it will start on September 5.
Iran knows how to do this. It came close before. In fact, the U.S. took active steps to prevent that.
Publicly announced steps included cyberattacks on Iranian equipment. More active measures were also taken. And U.S. allies participated in some operations.
Maybe this time, the U.S. and its allies won’t care. Maybe they’ll allow Iran to build nuclear arms. But it’s possible the U.S. and its allies may take action to prevent that.
Investors should think about that. Countermeasures could set off an uncontrollable chain of events in the Middle East.
A Possible Problem for Oil
Military strategists worry about Iran’s threat to oil shipments. The Strait of Hormuz connects the Persian Gulf to the world’s oceans. Ships in this waterway fall within range of Iranian missiles.
Every day, about a quarter of the world’s oil passes through the strait. That includes almost all the oil produced by Saudi Arabia and the United Arab Emirates (UAE).
There’s already tension between those countries. Saudi Arabia and the UAE are waging a proxy war with Iran in Yemen.
Iran has shown a willingness to attack ships in the strait. In May, Iran’s Revolutionary Guard was tied to mines that damaged four oil tankers.
We’ve Seen This Story Before
Iran threatened this same waterway in the 1980s. In 1987, U.S. Navy ships protected tankers in the gulf against Iranian attacks.
Tensions exploded in October 1987. On October 16, Iran launched missiles at a tanker. On October 19, the U.S. Navy attacked oil platforms used by Iran to launch missile attacks.
Investors might not remember that military clash. But those dates might be familiar. The attack coincided with the Dow Jones Industrial Average’s largest one-day decline.
Experts say that crash was unexpected. They argue there was no reason for a crash. Yet there was a market crash.
It’s likely global tensions added to selling pressures. There were other factors at work in October 1987.
Ignoring global tensions is a mistake. There’s a reason many traders sold the week before the crash.
Could It Happen Again?
Global tensions are high. A trade war is possible. Some data point to a global recession.
Stock market investors should be worried.
In less than two weeks, Iran might take steps to make weapons of mass destruction. If history repeats, there could be military intervention to stop that. Iran could retaliate. At that point, anything could happen.
If Iran strikes back, oil prices will spike.
China, already concerned about a slowdown, could take Iran’s side. China already seems to be helping Iran evade sanctions. Escalating tensions could force more overt support.
Oil price spikes caused bear markets in the past. That happened in the 1970s and 1990s.
Maybe this time is different. But to me, it makes sense to start worrying.
It’s not time to sell yet. But we need to check back after September 5.
Michael Carr, CMT, CFTe
Editor, Peak Velocity Trader