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World War 3 On The Brink Of Eruption | Stoic Markets

This could go very very wrong...

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Geopolitics has been very volatile for the last 4 years, and the last 6 months has been dominated by Israel and the events that begun on October 7th.

Most commentators are wasting time and breath trying to decide who deserves the blame for what has occurred.

Whether it was Israel’s fault, or Hamas, Iran or even the United States. The truth is that these are mere pedantics and the conflict stretches back literally decades.

What is important though, is how the conflict has been growing, drawing in foreign powers, and putting immense pressure on every country in the world.

The most recent events followed an Israeli strike on the Iranian embassy in Damascus killing 9 senior Iranian officers who were helping to coordinate Hamas and Hezbollah attacks on Israel.

Iran then responded firing hundreds of missile, many from Iran itself, directly at Israel, in what many see as an escalation of the conflict. Whilst almost all of the missiles fired at Israel were shot down or intercepted, Israel is incredibly likely to respond, causing another escalation.

Essentially we are watching this conflict spiral just as we saw the same happen in Ukraine. There is little hope for deescalation at this point, and it’s incredibly likely we will see things get worse not better.

Oil problems to come

Iran is one of the worlds largest oil producers and exporters, and their influence over other major oil producing countries and the region as a whole can not be ignored.

Those in charge in Iran are well aware that these sort of geo-political shocks threaten the supply of oil, and usually result in price spikes around the world.

WTI Crude oil prices have risen from $70 per barrel in December, to more than $84 per barrel today, a rise of 20% over a matter of months.

This comes at a time where US inflation levels are rising, not falling, and we’re entering an election cycle so the stakes could not be higher.

Whilst this event itself isn’t likely to have a major impact on the supply of oil, the escalation of the conflict as a whole certainly will.

And of course inflation has not only been impacted by the rising cost of oil. The Houthi’s in Yemen have been notoriously attacking ships passing through the the Red Sea, forcing hundreds of ships to go the long way around Africa, adding time and costs to their journeys.

One thing is abundantly clear, this conflict is not over. And prices will continue to rise.

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A new alliance?

Whilst this escalation to the conflict didn’t surprise many, something else certainly did.

Before Iran fired their salvo of missiles at Israel, they gave advanced warning to a number of countries in the region.

Saudi Arabia, the UAE and Jordan were all made aware of the attack against Israel, presumably to ensure they didn’t mistake it as an attack against themselves.

And whilst most Arab states hardly have a positive relationship with Israel, those 3 countries did proceed to provide a warning to the United States and Israel, and even coordinate efforts to ensure the attack was unsuccessful.

This seems to be the very early days of an alliance, and it was likely born out of a fear of escalation as opposed to support of Israel. But there is the potential this alliance could grow and expand.

My honest thoughts however, are that when Israel decides to next escalate the war, these Arab nations will be unsupportive at best, and the alliance will likely fall apart.

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