The Iran War vs. Your Portfolio
What an intense weekend it has been. I dedicated it to following the unfolding conflict with Iran.
There’s plenty for us to cover this week.
Today, we’ll explore several investment consequences stemming from this escalating conflict.
Specifically, we’ll focus on:
- UAE and Gulf States
- Gold and silver
- Oil
- U.S. markets
- China
Let’s dive in…
UAE + Gulf States Unsteady
Last year, as part of our emerging markets theme, I authored a piece about investing in the United Arab Emirates (UAE). The relevant ETF trades under the symbol UAE.
Interestingly, the UAE emerged as a primary target for Iran’s retaliation following strikes by the U.S. and Israel.
Iran deployed hundreds of drones and possibly a dozen ballistic missiles toward the UAE, striking locations such as:
- U.S. military installations
- Dubai International Airport
- Burj Al Arab 5-star Hotel
- And others…
Although most of the missiles and drones were thwarted or missed, a few managed to penetrate defenses.
The UAE ETF fell roughly 5% today, prompting me to liquidate my holdings. The country had flourished as a favored tax haven known for robust security attracting expatriates worldwide.
Given the new uncertainties around safety, my confidence in the UAE’s prospects has declined. If you hold this ETF, I suggest exiting now, locking in about a 28% gain since our initial recommendation.
Gold and Silver Take a Breather
Gold and silver started strong in early trading, with noticeable gains before the market opened. However, both metals have since softened. Gold remains up near 0.5%, while silver dropped $5 to $89.
This could signal the market’s hope for a swift conclusion to the Iran conflict, or reflect the dollar’s role as a “safe haven” asset suppressing precious metal prices.
Regardless, I remain unshaken. The core drivers pushing gold and silver higher still stand. The mounting debt crisis and resurgence of war continue to underscore the value of holding precious metals.
In today’s global climate, owning gold and silver remains essential.
Oil Surges
Oil is clearly positioned as a major winner amid the renewed hostilities with Iran, rising around 6% as of 2:00 pm ET.
I anticipate risk premiums will uphold higher oil prices for an extended period. Should the conflict intensify, prices are likely to escalate further.
One of my top picks, Brazilian oil giant Petrobras (PBR and PBR.A), climbed approximately 2.8% today.
This development bolsters Petrobras’ standing. Since its operations focus mainly on South America, it’s largely insulated from turmoil in the Middle East.
Brazil continues to offer an attractive refuge with affordable stocks yielding solid returns, with Petrobras leading the way.
U.S. Markets Hold Steady
The S&P 500 and Nasdaq remain near flat as of early afternoon trading.
This outcome is somewhat unexpected; I had anticipated more pronounced selling.
Markets appear to be betting on a rapid resolution to the Iran crisis. Hopefully, that proves true.
However, the conflict might drag out longer than predicted, potentially expanding into Iraq and other Middle Eastern nations.
If Iran intensifies attacks on oil infrastructure in Saudi Arabia and beyond, it could trigger broader market turmoil. As Jim Rickards pointed out in his excellent analysis this morning, China would be most impacted, with Europe affected to a lesser degree.
The U.S., being nearly energy self-sufficient, faces fewer risks. Conversely, Europe and China find themselves in more precarious positions.
China: Elevated Risks
Turning to China, I’m growing increasingly wary about its stock market outlook.
Aside from being Iran’s largest oil buyer, rumors suggest China may have supplied military aid to Iran. This could provide the Trump administration grounds to target Chinese firms listed in the U.S.
The Trump administration has threatened before to remove Chinese stocks from American exchanges, and this situation could reinforce that stance. When Trump last issued such threats, I trimmed more than half of my China exposure and shifted into gold and silver miners—a profitable move.
This week, I plan to reduce Chinese equity holdings further.
More Warfare Insights Coming
In December, I published a letter titled Modern Warfare: Lessons From Ukraine, which received strong reader acclaim. I’ll release a follow-up this week focusing on Iran.
The dynamic between Iran, Israel, and the U.S. is quite different from Ukraine, presenting various new perspectives to consider.
Gaining insight into modern combat is unfortunately ever more vital for grasping geopolitical developments. Staying informed on these issues is crucial for savvy investing in today’s environment.
Expect this analysis soon.
About the Author
