Last night, the world was rocked by news that Israel had launched sweeping missile strikes on Iranian military and nuclear targets.
So far, the key market reactions are these:
- U.S. markets are down slightly, but not nearly as far as they looked to be overnight yesterday. Futures were significantly down in the immediate aftermath of the strikes
- VIX shot higher, but is already on the way down, which makes a lot of sense
- Oil is still significantly elevated, but has already dropped from highs last night
Of course, these things are in a state of constant flux, and this is just the beginning of what I am certain will be an extended conflict.
If you follow ProsperityPub on Telegram, you have already heard some of my initial thoughts about what happened last night. But in this newsletter, I’ll give you some of my extended reaction to last night’s events.
Now, I don’t claim to be an “expert,” per se, but I did study International Relations in college and have been obsessed with global politics for nearly two decades! In fact, this was my area of focus and interest before I ever thought about the stock market!
So when events like these arise, I can’t help but run my mouth (or in this case, my fingers) about what I think is happening.
Of course, the first thing to keep in mind is that any conflict is a tragedy with terrible losses on both sides.
In this case, though, this outcome was extremely predictable.
Think of Iran like the “crazy” kid on the playground. There are plenty of kids on the playground who are bigger than Iran, and tougher than Iran, but there might not be anyone harder to predict than Iran.
And that’s why, as the Trump Administration has been fond of saying recently, “Iran cannot be allowed to have a nuclear weapon,” in the eyes of the U.S. and Israel. Because even more so than a country like North Korea, Iran might use its nuclear weapon without warning, simply to do the greatest possible damage and destruction to an Israeli or U.S. target.
That’s why Israel felt they had to act. Clearly, Iran was getting closer to getting a nuclear weapon than anyone was comfortable with, and it fell to Israel to do the “dirty work” and strike first.
And, in my opinion, this certainly was Israel doing the “dirty work.”
The U.S. is maintaining plausible deniability that they were not involved in planning these attacks and that Israel struck without their help. And for the sake of negotiations with Iran, they should.
But no one believes Israel ran an operation of this magnitude without U.S. knowledge and at least passive sign-off.
Trump’s TruthSocial posts this morning pretty much suggest as much:
Israel was doing the “dirty work” of the U.S., but not only the U.S.
Iran has made itself a geopolitical enemy of everyone in the Middle East, including Saudi Arabia, Egypt, and more.
Their instability and hostility are a threat to an already tumultuous region trying to find some modicum of peace.
And that’s why, while I do expect this conflict to continue for a while, I don’t expect it to bubble over into a broader war, and certainly not World War III.
Iran really doesn’t have any friends.
Russia and China will “play nice” at times when it’s convenient for them or gives them an opportunity to be a thorn in the side of the U.S., but they’re not going to go to war to protect Iran.
And while Iran might be unpredictable, they’re not going to intentionally provoke the U.S. by attacking U.S. targets or killing American military personnel.
Tensions will remain elevated between Iran and Israel for a while, but even that really isn’t “news.”
Which is why I think you’re already seeing the market cool down a bit.
The situation is in flux, and even as I write this, the VIX has ticked back up a little. However, as long as we avoid escalation from here, I wouldn’t be too worried about a major meltdown.
We’re sure to be talking about it a lot in the coming days, and I’ll post any key updates over on Telegram.
To your prosperity,
Stephen Ground
Editor-in-Chief, ProsperityPub
P.S. If you haven’t been watching what Jack Carter is doing with TSLA every week, you need to check this out right now.
