How Will Iran Tensions Affect Your Investing?

Pundits are debating whether Trump simply did what was necessary in killing the top Iranian general or if the action was rash and will drag the US into an open war with Iran. While the politicos debate the merits of the President’s actions, we are wondering this. How will Iran tensions affect your investing?

Middle East Tension and Investments

Crude oil futures are generally the first thing to go up when tensions rise in the Middle East and especially around the Persian Gulf. If you were looking into how to invest in Saudi Aramco, you may wish to take the possibility of increased hostilities into consideration. While oil stocks are up, European stocks are off, according to The New York Times.

European shares extended losses on Monday as tensions following the killing of a top Iranian general by the United States kept buying restricted to safe havens, while energy stocks benefited from higher oil prices.

The pan-European STOXX 600 equity index was down 1.2% by 0914 GMT and was set for its worst day in a month. German stocks were the worst performers in the region, dropping about 1.9%.

Higher energy costs tend to drag down the US economy and the combination of threats to world trade from the ongoing trade war as well as the strong US dollar are hurting US manufacturing.

American manufacturing activity contracted last month more than it had in a decade, data released Friday showed, a sign that economic damage from President Trump’s trade war could linger even after the United States and China sign an initial trade deal.

An index published by the Institute for Supply Management dropped to 47.2 in December, the lowest reading since June 2009 and the fifth straight month of contraction. A reading below 50 indicates the manufacturing sector is contracting.

No one in the Middle East really wants a face-to-face shooting war between Iran and the USA as it would likely spill over into the entire area. But, the sort of brinksmanship that could evolve has diplomats worried. As Iran tensions affect your investing, you ought to pay attention as well!

Short and Long Term Investing and Iran Tensions

Tensions are always high in the Middle East. And, generally, cooler heads prevail to prevent damaging escalations. That having been said, nobody was able to rein in Saddam Hussein or the second President Bush. Or, for that matter, nobody was able to stop Osama bin Laden and al Qaida from destroying the World Trade Center and provoking the US invasion of Afghanistan and Iraq. The nearly 20-year US military presence in the area dates back to the inability of locals to forestall these events.

So, every time there is a threat to stability in the region, oil prices go up, European and world stocks go down, and, usually, things simmer down. But, what if they do not? How will Iran tensions affect your investing if the US and Iran do not back off but rather increase military attacks?

Investing in US Energy Production

With the advent of fracking, the USA has hugely increased oil and natural gas production. With 61% of US energy coming from oil and natural gas, US producers will benefit from higher prices. Coal will also benefit if problems in the Middle East continue. Producers who still export oil and natural gas to the USA, like Colombia, will benefit as well. Europe, Japan, and everyone who relies heavily on Middle Eastern oil will hurt.

With a mix of issues affecting investments today, a useful thought is to look for investments that do not lose money no matter what is going on in the Middle East or with the trade war or the highly-priced dollar.

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