This past week you saw the U.S. administration renew its pledge to punish those firms that purchase crude from Iran after the reapplication of U.S. sanctions on the Iranians. The response from Tehran was swift and sharp. Iran has contingency plans to close off (or at least hinder) oil shipments from countries that neighbor Iran. They can in fact stop oil from getting out to world markets if they try. Oil prices are already climbing on the overt threat and will only go much higher if they make good on their promise.
It explains why you need to invest in gold in your investment and retirement portfolios. Geopolitical chaos like that Iran is threatening to unleash on the world markets and economy is real. Gold offers insurance and protection during market turbulence. You ought to seriously investigate the Gold IRA rollover rules and regulations now before this growing threat to world economic prosperity becomes any more serious.
The Threat from Iran Against Oil Markets and the Global Economy is Real
You have to understand that this bellicose threat from Iran is not far-fetched. It is both real and possible. Iran started their retaliation against the upcoming November 4th re-imposition of sanctions from the U.S. early this time. If the U.S. manages to stop other countries from purchasing oil from them when these sanctions go back into effect, they have promised to carry out their devious plan.
The Iranian president would not show his full hand on how he would accomplish such an oil export disruption against neighboring Persian Gulf countries. His primary commander in the feared Iranian Revolutionary Guard elite unit disclosed their plans in practice. This Major-General Qassem Soleimani warned starkly in a letter on the Iranian Islamic Republic News Agency (the IRNA) that he is ready to carry out all presidential commands to stop oil exports from leaving the Gulf, with:
“I kiss (Rouhani’s) hand for expressing such wise and timely comments, and I am at your service to implement any policy that serves the Islamic Republic.”
Geopolitical threats do not get any clearer cut than that.
Could Oil Actually Climb Back To the Triple Digit Prices Again?
The Iranians can do it too, as the narrow Straight of Hormuz that leads out of the Persian Gulf is a mere few miles wide. They hold the one shore as well as islands in the middle of the straight. Their gun boats patrol the straight and occasionally have scuffles with U.S. warships passing through to the Persian Gulf as well. It would only need the Iranians to successfully sink a few defenseless oil freighters to effectively disrupt the shipping flow of oil (among the largest in the entire world) from the Gulf to the Arabian Sea.
Oil Analyst Stephen Brennock of PVM Oil Associates expounded on the serious threat through a research note, with:
“Around 17 million barrels per day or 35 percent of all seaborne oil exports pass through the strategic waterway and, needless to say, such a move would propel oil prices well into triple figures… Iran’s leadership is clearly adamant that the new situation created by the U.S. withdrawal from the nuclear pact will not go without consequences. This, in turn, should go a long way to ensuring that the geopolitical premium [on oil] remains alive and well.”
Of course the U.S. as the dominant global military power could retaliate against the Iranians with speed and efficiency. No one disputes the fact that American efforts could sweep away the Iranians, given sufficient time and warning. The problem is that the Iranians will have the first-mover advantage of surprise on their side. After a few oil tankers are burning, their goals of pushing up world oil prices into the hundred plus dollar per barrel level would be achieved. The threat alone has driven oil prices higher in the last weeks.
Iranian Oil Could Be the Latest Division Between the U.S. and Its Key Allies
Another dimension to the Iranian oil threat is the rift it has created with the U.S. and its key allies in Europe. The United States was the only nation that withdrew from the 2015 nuclear accord that the President strongly disagreed with keeping. At the same time, the European Union insisted on maintaining the pact, even without the U.S. and its involvement.
The Europeans promised the Iranians that they would attempt to ensure the flow of Iranian oil out and European investment in to the country in defiance of the U.S. Yet despite this offer to help Iran’s oil situation, the promise of crippling American sanctions on any company doing business with Iran is tying the hands of the Europeans. They are quickly learning that their soft power does not give them the needed strength to provide Tehran with the assurances it is seeking in the face of America’s still-dominant economic and military position in the world.
The Europeans are making heroic and valiant efforts despite this. This Friday the Chinese, Russian, British, French, and German foreign ministers are all sitting down together with the officials from Iran to try to come up with creative solutions for maintaining the nuclear accord that opened Iranian export and import markets in 2015.
Major Investment Banking Analyst Goldman Sachs Believes Commodities’ Prices Will Rise Too
Goldman Sachs (the major investment banking analyst giant) agrees that this is one of the key factors that will support oil price levels this year. Some analysts have thought that the erupting trade war with China would depress global commodity prices. They have also worried that OPEC boosting its production of oil might have volatile effects on oil prices.
Goldman Sachs discounted these objections to a bullish oil market this year in a research note:
“Only markets that cannot be rerouted globally to other consumers will be impacted by the proposed July 6th tariffs… We believe that the trade war impact on commodity markets will be very small, with exception of soybeans where complete rerouting of supplies is not possible… The momentum in oil has already turned on news of tighter Iranian sanctions and additional supply disruptions.”
In other words, it only needs the sanctions being tightened up on Iran (which the U.S. is doing) to cause oil prices to rise. Whether or not the Iranians stop the oil flow from the Persian Gulf oil producing neighbors or not, prices can still rise because of the supply disruptions to the market that the sanctions will create. They will effectively lower world oil output by millions of barrels of oil per day when the U.S. stops any other country from trading Iranian oil, as this chart makes clear:
Gold is the Anchor Your Portfolio Needs as Oil Prices Rise and Equities Decline
The proverbial “writing is on the wall” where geopolitical tensions and oil prices are concerned. Global and U.S. equities suffer when there is both shockingly higher oil prices and regional chaos in the Middle East. Gold is the antidote to this serious threat on your retirement holdings. It’s prices actually tend to rise in sympathy with oil, and the yellow metal is a historically proven tangible asset that has safeguarded people’s money for thousands of years.
Now you know why you need a gold IRA. You still have time left to figure out what gold goes in an IRA. Don’t wait until the Persian Gulf producing oil tankers in the Straits of Hormuz are dodging Iranian naval bombardments to act.