This is not good news, this is not what you want to see happening, nor what anyone currently needs, especially given the powder keg that is geopolitics in 2019.
Yet, this is the situation that the world now finds itself in and seemingly it appears to be the direction that the "powers to be" are pushing us, setting the stage for rapidly rising gold and oil prices.
Last week, as reported on, we had the unfortunate "Oman tanker" attack, in which Iran was blamed (whether correctly or not is still yet to be seen), for attacking two commercial vessels near the Strait of Hormuz, a crucial transit and shipping route within the Gulf region.
This enraged both the United States, who believe Iran carried out the attack and Iran itself, who claims that this was a "false flag" carried out by U.S. Interests, who wish to see Iran further destabilized and face increased scrutiny.
The fact is, we don't know who is right and who is wrong, but what we do know is the ramifications of these actions.
Hostilities have only continued to escalate since last weeks Oman tanker attack, hitting a boiling point this morning as a U.S. Military drone was shot down by none other than Iran.
They have taken full credit for this action and are not trying to deny it, as they claim the drone was illegally operating within their air space and they had every right to protect their borders and interests.
The United States on the other hand, paints a very different story, stating that the drone was shot down in international airspace as it operated over the Strait of Hormuz, meaning that this was a completely unprovoked attack.
Iran was fast to provide photo evidence, showing the drone plummeting from the sky after it was struck down within their borders. However, these photos were quickly disproved and shown to be old photos from a previous military strike that occurred in 2017.
This news, plus strong signals from the FED indicating a rate cut in the near future, have caused oil to jump by over 5% and gold by 3.38% at the time of writing. Coming along for the ride, silver also surged higher, increasing by 3.57%.
Iran may of accidentally shown the incorrect photos, but at this point that doesn't matter, as the error is rapidly spreading across global media and is being used against them, most notably by the United States who are claiming that this is proof that they are lying about the conflict.
On his twitter, President Trump made the two following ominous tweets;
"Iran made a very big mistake!" and
Make no doubt about it, the Neocons within the United States political establishment are going to be calling for blood and retribution, which in the end, is not going to be good for anyone.
As previously mentioned, 20% of the world's global oil supply flows through the Strait of Hormuz, making it a key strategic location for Iran and one that it could easily disrupt if they so choose to do.
They know this and they are going to use it to their full advantage, however, so too does the United States and their allies, they are going to bring down their full might to ensure that global trade and production continues to churn along, unhindered.
However, this won't be settled overnight and we are going to see both gold and oil continue to surge higher, as uncertainty and fears continue to escalate.
With a rapidly rising oil price, the cost of everything else will follow suit, as it is in one way or another linked to the cost of all other goods, either directly or indirectly such as rising transport costs.
What this means is that inflation is going to rear its ugly head and in a serious way, $100 per barrel oil could easily become a real reality once again in this scenario, which is going to have a massive impact on the supply chain of all products.
Gold, the best hedge against inflation that this world has ever seen is going to come along for the ride, possibly even shattering the $1900 per ounce level once again before moving on to new highs.
Hopefully, sanity will be restored and things can deescalate, but unfortunately, this grows less and less likely with each new threat and each new act of aggression.
Get ready for rising oil prices, get ready for rising gold prices, get ready for increased uncertainty.
- As first seen on the Sprott Money Blog
- As first seen on the Sprott Money Blog
