Hey y’all,
So, it’s not exactly a shock, but after Israel completed a successful operation to kill Hezbollah leader Hassan Nasrallah earlier this week, Iran has launched missiles at Israel this afternoon (U.S. time).
Israel has a hugely sophisticated network of missile defense systems. Between Iron Dome and David’s Sling, most of these missiles have been shot down, averting what could have been a much more significant crisis and loss of life. At present, there has been zero reported loss of life in the country.
Immediately, of course, there will be panic about the outbreak of World War III. I don’t think you need to worry about that.
There’s a certain degree of showmanship here. Hezbollah is a front group for Iran and always has been, and the Ayatollah and leadership in Iran use them as an extension of their own military force.
Iran couldn’t tolerate such a significant attack against Hezbollah without a subsequent show of force; however, they were well aware of Israel’s defensive capabilities and recognized that the missile attack likely would be a loud bark without a lot of bite.
Remember, Iran launched a similarly unsuccessful attack on Israel back in April.
So, as far as the outbreak of a war that drags in American troops, I don’t think that’s immediately on the horizon. But I do think there are three big things to take away from this attack. Here those are:
First, the Middle East is as unstable as it has been at any time since at least 2020, and probably much earlier than that.
According to the speech Prime Minister Netanyahu gave at the United Nations earlier this week, Israel views itself as part of a seven-front war.
These nations are all supporters of Hamas and/or proxy states for Iran/Hezbollah, and therefore Israel views them as a threat.
But rather than shrinking from the challenge, Israel has shown its teeth both with the pager attack of a few weeks ago and the operation against Nasrallah a few days ago.
With the stability offered by the Abraham Accords, Israel has less to fear from neighbors outside these seven fronts. While Egypt and Saudi Arabia are not officially member states, relations between those countries are much warmer now than they have been for decades.
Israel is making the gamble that they can show enough aggression to win this seven front war without igniting a more significant regional or global conflict, and, so far, it seems the gamble is paying off.
Israel has already made clear that they will retaliate, and that retaliation could escalate things further. It’s too soon to tell.
As that process unfolds, the potential for the breakout of a more serious war is clearly elevated, and instability in the region is high. To compound frustrations, the White House has sent mixed messages to all sides, forfeiting their authority with both Israel and its enemies.
There is no clear leader in the region. Israel has defanged the threat from Iran significantly in the last few weeks, and the United States’ messaging is too confused to take a leadership role. Under those conditions, instability will continue to be high, until or unless a hierarchy can be established.
Second, this will be an undisputed campaign win for President Trump.
Now, let’s be clear: when lives are at stake, the fallout in American Presidential elections is a relatively minor side conversation.
But Trump will campaign on this. He’s already started:
Whatever your opinions on him, it’s hard to argue with his point. Instability in the region has ticked up significantly since he left office. And the confused messaging from the current administration, trying to play both sides since the October 7th attacks of almost a year ago, hasn’t helped.
Trump can make a pretty cogent argument that anyone concerned about foreign policy ought to vote for him — if, indeed, his campaign can make a cogent argument at all.
Third, watch the price of oil.
One logical retaliation from Israel could be to destroy Iran’s oil fields, essentially crippling their economy. Just look at what sanctions against Iranian oil have done to their GDP in the past:
Now, Iran is only responsible for 4-5% of the world’s production of oil. So even if their capabilities were entirely destroyed, it shouldn’t send shockwaves through the economy.
But there’s a potential domino effect. And increasing instability and uncertainty in the Middle East is never good for oil.
We’re already seeing oil futures tick higher since noon:
So, all told: no, global war is not likely. But the potential that this could spin into an “October Surprise” that has a huge impact on the election is present. Investors should monitor the situation closely and watch for potential ripple effects.
To anyone reading this who has family in these regions, I pray for their safety and security tonight and in the coming weeks!
To your prosperity,
Stephen
