In view of the recent heightened tensions with Iran, one may wonder how an average investor can take advantage of the effects Iranian regime's belligerent rhetoric. I have noticed that every time the regime threatens the Western World, the oil futures markets skyrocket. This is because the Iranian Revolutionary Guard threatens to disrupt oil supply in the event of any conflict. This is primarily possible because Iran has strategic access to the Strait of Hormuz, which is a key super tanker shipping lane. About 40% of the worlds shipped oil, passes through that choke zone; and being only 21 miles wide, it can be easily blockaded with conventional naval area denial mechanisms temporarily. Also, Iran is the 4th largest exporter of oil, and has an inherent control of the oil supply. If a full fledged conflict arises there may be no way of profiting from it since both economies would be harshly affected, but one can easily profit from the speculation arising from the recent sabre rattling.
Your Iran Conflict Portfolio:
USO- United States Oil Fund Long
UNG- United States Natural Gas Fund Long
QQQQ- PowerShares Short
GLD- Gold ETF Watch
DBC- Commodity ETF Long
FRPT- Force Protection Inc. Long
Picture: Courtesy of Wikipedia
3 comments:
Yes, I am in agreement.
If the markets react to this negatively better to stay away from companies and just get long ETF's.
ETF's are the real deal not the companies themselves.
Your entry reminded of a great article by one of my favorite columnists, Thomas Friedman.
Here is what he wrote about Iran and Israel: http://www.nytimes.com/2008/06/08/opinion/08friedman.html
Very insightful.
David thank you for the kind comments
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