This Could Bring Gas Lines to U.S. and Spell Fortunes for Investors

Iran versus Israel, New Chapter in the Middle East Wars, and the Biggest Oil Chokepoint on Earth

After decades of proxy battles, assassinations, and sabotage, two Middle Eastern powers find themselves on the brink of all-out war once more.

Over the weekend, Iran unleashed a barrage of missiles and drones, targeting Israel in in a revenge attack for Israel's recent bombing of an Iranian diplomatic compound in Syria.

Israel’s chief military spokesman, Daniel Hagari, said Iran’s attack involved more than 120 ballistic missiles, 170 drones and more than 30 cruise missiles.

Now, these drones and missiles did not land and cause damage. Israel says to have swatted 99% of them from the sky.

But that doesn’t change one significant fact…

After years of operating through proxies, Iran launched an attack on Israel from its own soil for the first time ever.

Funny enough, the attacks happened the day after President Biden warned that any attack by Iran would be a big mistake. It seems the Iranians, like the Russians before them, aren't too bothered by Biden's tough talk.

Is a War Looming?

That’s a reasonable question to ask right now. We have Iran ramping things up like never before, and Israel is promising to retaliate with full force.

The Middle East has always been a chaotic place, but things are particularly tense right now. I believe there's a pretty good chance we'll see a big regional war there in the coming weeks or months.

Here's what Prime Minister Netanyahu had to say following the attacks:

We appreciate the U.S. standing alongside Israel, as well as the support of Britain, France, and many other countries. We have determined a clear principle: whoever harms us, we will harm them.

Then came another round of Biden's tough talk, once more.

Iran — and its proxies operating out of Yemen, Syria and Iraq — launched an unprecedented air attack against military facilities in Israel. I condemn these attacks in the strongest possible terms… I’ve just spoken with Prime Minister Netanyahu to reaffirm America’s ironclad commitment to the security of Israel.

So, if we just go by the rhetoric, escalation seems inevitable.

The Biggest Oil Chokepoint on Earth

But amidst the Iranian attack blasts, there was something else that happened, largely unnoticed by the media.

Iranian armed forces seized a container ship, identified as the Portugal-flagged MSC Aries, as it was en route from the United Arab Emirates to India. The ship is reportedly part of the Zodiac group, owned by Israeli billionaire Eyal Ofer and his family.

Now, this wouldn't be all that remarkable if it weren't for where the Iranians seized the ship: right near the Strait of Hormuz.

That's what caught my attention about this news... And with good reason.

The Strait of Hormuz is a slender water passage connecting the Persian Gulf to the Arabian Sea. It serves as a critical route for global oil shipments, with a substantial portion of the world's oil flowing through its narrow confines.

That’s because the Persian Gulf is bordered by five of the world’s top 10 oil-producing countries: Saudi Arabia, Iran, Iraq, UAE, and Kuwait. The Strait of Hormuz serves as their sole sea route to the open ocean... and global markets.

Oil tankers carrying oil from the top 5 exporters of the Organization of the Petroleum Exporting Countries (OPEC) must all navigate through the Strait. This accounts for roughly one-third of the world’s seaborne oil trade.

Iran has a hold on this tiny yet crucial area, spanning about 21 miles at its narrowest point, as shown on the map below.

If Iran, with its significant control over a portion of the coastline along the strait, were to block or disrupt traffic through this crucial artery, it would swiftly disrupt the global oil supply. This disruption would send oil prices soaring, triggering widespread economic ramifications and geopolitical instability around the world.

Even if we don't have a full-blown war — though it's seeming more likely — Iran has threatened to close the Strait plenty of times in the past.

Now, I'm not saying the chances of it happening are inevitable. But with tensions in the Middle East higher than ever, they're higher than they've been in a long time.

Even the U.S. government has admitted that Iran could block the Strait of Hormuz "for a period of time" before anything could be done to reopen it.

And keep in mind that U.S. military strategists have known about this situation for years. They've played out tons of war games, and nobody has figured out a way to counter Iran's grip on the Strait.

Oil Shocks and What They Mean for You

This situation is a stark reminder that oil is not just a source of energy – it is also a weapon, one that has been carried into war many times already.

A blockade of the Strait of Hormuz would cut off nearly 21 million barrels of oil per day from world markets. That’s roughly 20% of the global market.

Calling it just a supply hiccup would be a huge understatement. It would be much more than that… a major oil supply shock.

And if you look back at history, they're called “oil shocks” for a good reason.

The 1973 oil shock, triggered by OPEC's embargo during the Yom Kippur War, caused a 4% decrease in global oil supply. Oil prices quadrupled from $3 to over $12 per barrel. Similarly, the 1979 oil shock, spurred by the Iranian Revolution, led to disruptions in Iran's oil production. This caused a 5% fall in global supply and prices more than doubling from $14 to over $35 per barrel.

This should give you an idea of what the absence of about 20% of the global oil supply from world markets could do to oil prices.

Now, it's true that the U.S. being the biggest oil producer has managed to reduce its dependence on foreign oil. But the oil market is still global, and Americans can't escape the ups and downs of oil prices worldwide.

And keep in mind that the U.S. still brings in roughly 9 million barrels of foreign oil every day. On top of that, America imports a ton of oil indirectly through manufactured goods. If foreign manufacturers have to shell out more for oil, you can bet they'll pass those extra costs on to us.

That means Iran could still send oil prices soaring for Americans by closing the Strait of Hormuz.

But there would be one big winner... oil stocks.

Now, I'm not rooting for war or a major regional conflict. But it seems like it's on the cards, and brushing off the significant investment consequences of that would be foolish.

Regards,

Lau Vegys

P.S. War or not, this is the time to own top-quality oil and natural gas stocks. That means companies that have a track record of performing well during turbulent times. These are precisely the types of stocks we track in our Crisis Investing portfolio, all of which Doug Casey himself owns. We already own a handful and plan on adding several more this month and next.