Is The Market Too Complacent About Soaring Iran Tensions | WHAT REALLY HAPPENED


Is The Market Too Complacent About Soaring Iran Tensions

Are equity markets too complacent about fast-rising Middle East tensions? Perhaps – oil shocks have killed more US economic expansions over the last 40 years than any other single cause. US Energy stocks are a reasonable hedge, given that they handily win the prize for “most neglected group” in the S&P 500 at just a 5.2% weighting versus a 10-year average of 9.3%.

This morning we had a client write in to ask if markets were too complacent about rising Middle East tensions and what that might do to oil prices. It is a fair point:

Investors are glued to one channel – US-China trade talks – and therefore less engaged on other topics.

Iran has recently dialed up tensions in the Middle East as US led sanctions have taken a toll on its economy.

For example, Iranian-backed Houthi rebels in Yemen have launched drone attacks against Saudi Arabian oil industry infrastructure. Also, Tehran has visibly amped up its missile defenses against possible US airstrikes.

In the US, leaked White House documents report that America may move 120,000 troops into the region. President Trump denied the move, but the leak could have easily been intentionally released as a warning to Tehran.

Much of this has transpired in the last 48 hours, but it has had little effect on oil prices:

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