By Nick Giambruno, chief analyst, The Casey Report Today, the chances of a war with Iran are higher than ever… And if it does happen, it will have tremendous consequences for the price of oil. You see, about a year ago, I warned readers of my newsletter, The Casey Report, that the next big war in the Middle East was coming. And I showed them why it would focus on Iran. The momentum in the Middle East has turned in favor of Iran. It won’t surrender its strategic gains. It’s unthinkable. But the U.S. finds an empowered Iran intolerable. And it isn’t going to sit back and do nothing, either. That’s why the possibility of a major regional conflict… which would be a catalyst for oil… is so high right now. Let me explain… Tensions Flaring First, you should understand how this all started… and why it’s all happening around a key waterway in the Middle East named the Strait of Hormuz. Things have been heating up around the Strait. Six oil tankers were attacked near the Strait and the Persian Gulf, and the U.S. government blamed Iran. Iran then shot down a $120 million U.S. drone. It claims the drone was flying in its airspace. In response, Trump approved airstrikes against Iranian targets. It would have started a full-scale war… but Trump pulled back at the last minute. And those are just a few of the skirmishes that are now making headlines. In short, tensions between the U.S. and Iran are flaring. But Iran holds a powerful card… because it controls the Strait. Oil’s Most Important Chokepoint The Strait is a narrow strip of water that links the Persian Gulf to the rest of the world. It’s the most important oil chokepoint in the world. Five of the world’s top 10 oil-producing countries – Saudi Arabia, Iran, Iraq, the United Arab Emirates, and Kuwait – border the Persian Gulf. The Strait of Hormuz is their only sea route to the open ocean… and world markets. Every day, nearly 19 million barrels of oil pass through the Strait of Hormuz. That translates into roughly 33% of the world’s oil traded by sea. It’s over $1.2 billion in value every single day. That’s part of the reason why big Middle East wars are often catastrophic for global oil supplies. After all, almost 40% of global oil exports comes from the Middle East. Take a look: 
As you can see, shutting down the Strait is Iran’s most powerful option in this conflict. And the investment implications are huge… The Next Oil Shock If Iran shuts down the Strait of Hormuz, it would cause the largest oil supply shock the world has ever seen. Take a look: 
A “price shock” is when the price of something rises so quickly that businesses cannot react. Two classic examples are the First and Second Oil Shocks. The First Oil Shock happened in 1973. A regional war in the Middle East caused the price of oil to nearly triple. It triggered a massive gas shortage in the U.S.… and a lot of panic. Drivers sat in lines stretching for blocks, waiting to fill up their gas tanks. Some gas stations closed. Others operated by appointment only. Rationing was introduced. | Recommended Link | This is what a Socialist President will do We are witnessing a raging Socialist movement in America today. If you care about your health... your wealth... your family... and your future... it's critical for you to understand what's really happening and what is most likely coming next. | | | -- | The Second Oil Shock came in 1979. Crude prices nearly tripled again… also caused by conflict in the Middle East. You can see what happened to the oil price during both oil shocks in the next chart. 
I would expect the Third Oil Shock’s effect on the oil price to be at least as severe as the first two shocks. Recall that oil prices nearly tripled. In today’s prices, that would likely mean oil shooting above $200 a barrel… A Golden Opportunity However, the market doesn’t appreciate how close we are to a war yet. The oil price has barely moved, despite the imminent danger to supplies. We haven’t returned to pre-2014 levels yet, let alone pre-2009 ones. And this distortion in the market is handing us a golden opportunity. In this environment, you want to own the highest-quality oil stocks. That means two things: 1) Companies that have done well during turbulent times in the past. 2) Companies that aren’t heavily exposed to trouble in the Middle East. As Middle East supply disruptions cause oil prices to skyrocket around the world, companies that fulfill these criteria will be your ticket to profits. So if you haven’t yet, now’s the time to get in. Regards, 
Nick Giambruno
Chief Analyst, The Casey Report
P.S. In my Casey Report advisory, we have four of the world’s top oil companies in our model portfolio. Buying these names is the best way to play the unfolding crisis with Iran. They check both boxes above… They’ve all weathered rough times in the industry, and they have minimal to nonexistent exposure in the Middle East. If you’re a Casey Report subscriber, you can read about them in the latest issue right here. If you’re not a subscriber yet, go here to lock in your subscription today. 
Reader Mailbag Today in the mailbag, Doug Casey’s essay on the state of American health care – and how much a human life is really worth – continues to stir debate… It’s pretty much the same blueprint of all government programs: wealth transfer, from those that work to those that don’t, for votes – or in the case of corporations, campaign funds. That being said, I have no problem with assisting those who through no fault of their own are mentally or physically unable to be productive. That’s about 10% of the population in any civilization. Why is it five times that in the U.S.? Basically, because our government enables and promotes such lifestyles by subsidizing poor decisions, thus making it possible to pick up a turd by the “clean” end. Unfortunately, those who produce wind up with the dirty end of said turd (responsibility for those who made poor choices). I can understand why those who have gotten the dirty end for the past 50 years (Johnson’s “Great Society”), even while knowing these programs are not sustainable, are trying to at least break even on their “return on investment,” which is another myth. The youth of today, assuming they aren’t brain-dead, are under no such illusion, which feeds their resentment. Perhaps that’s why they are for education loan forgiveness. Get while the gettin’s good. – Ernest After reading Mr. Casey’s essay on health care, all I can say is WTF. While I disagree with most of what Mr. Casey has proposed in his essay, I have to credit him for asking the questions that no one dares to ask on the subject. Many illnesses brought on by substance abuse, obesity, etc. can be lessened or cured with changes in lifestyle, but most doctors and patients would rather take a pill instead of taking responsibility for making lifestyle changes. The cost to provide oxygen to a person suffering from lung disease because of the three packs of cigarettes smoked each day is the same for someone who just had an accident. A doctor will charge the same rate to see someone who has type 2 diabetes caused by obesity compared to an individual with type 1 diabetes which is caused primarily by genetics rather than lifestyle. Should someone have the same priority for a liver transplant because it was severely damaged by years of alcohol or drug abuse prior to going into rehab, compared to those who did not abuse any substance but are in need of a transplant? Should we deny medical treatment to a drunk driver but give it to their victim instead? Mr. Casey’s essay is based on logic and the cold reality of dollars and cents. But what of the moral dimensions of providing or denying health care based on an individual’s lifestyle choices, state of health, or their ability to pay? That argument cannot be measured in dollars and cents nor be addressed exclusively by logical arguments. – Richard I’m so enlightened by your “Die Like a Dog – or Not” article. It stirred me to conclude that verbiage in our society is constantly being redefined. PR is information, true or false, fed to the masses to sway their beliefs. Or should we believe that PR, meaning personal responsibility, would still be the best solution for the majority of social problems? Thank you for continually challenging. – Steve As always, send any questions, comments, or concerns to feedback@caseyresearch.com.
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