It has been plain that a war with Iran has been coming for awhile. The question was what would it look like? Would it be a Venezuelan style coup d’état? Or would a popular uprising sweep away the ancien régime? Or would it become a quagmire. Two weeks in, and the likelihood of the first two outcomes, which would have been ideal, are looking less likely, and a quagmire is becoming more likely. In market terms, this can be seen in the 12mth oil future is now beginning to break out.
Even US January 28 natural gas futures are starting to look a bit perky.
Both these signals are important as they will guide non-middle eastern producers to whether it is worthwhile to increase production or not. As said above, it was clear that some sort of conflict was coming between the US, Israel and Iran, but it was not clear what the result would be. A civil uprising, would mean the world would be awash with Iranian oil in a few years, while conversely a quagmire is plainly bullish energy prices. I generally assume my portfolio would do okay - but the first two weeks has seen some surprising correlation breaks.
