On October 7, Hamas, an armed Palestinian militant organization that controls the Gaza Strip, launched Operation Al-Aqsa Flood.
It was the most significant attack against Israel since the 1973 Yom Kippur War, which started almost 50 years ago to the day.
Now, Israel has formally declared war for the first time since 1973.
The Middle East is on the precipice of a regional war that could eclipse the 1973 Yom Kippur War.
Many people don’t appreciate how close we are to a catastrophe of historic proportions that will touch everyone.
Remember, American support for Israel during the 1973 Yom Kippur War was the catalyst for the OPEC embargo, which caused the first oil shock. The oil price roughly quadrupled, from around $3 per barrel to about $12 in a matter of days.
It immediately triggered an energy crisis. There were gas shortages and panic in the US as drivers sat in lines stretching for blocks, waiting to fill their gas tanks.
The second oil shock followed in 1979 as crude prices nearly tripled. A large conflict in the Middle East was again the cause—the Iranian Revolution and the subsequent Iran-Iraq War.
A third oil shock occurred in 1990 as Iraq invaded Kuwait, causing oil prices to more than double.
Here’s the bottom line.
Big Middle East wars are often catastrophic for global oil supplies. And supply disruptions cause price spikes. It’s a simple relationship.
This isn’t surprising. Analysts estimate that over 40% of global oil exports come from the Middle East.
Today, the Middle East is again on the cusp of a large regional war between Iran and its allies and Israel and its allies. The conflict could potentially be more destructive than the conflicts that caused the prior oil shocks.
Iran’s allies consist of Hamas and several other armed Palestinian groups, Hezbollah in Lebanon, Syria, an assortment of Iraqi militias, and the Houthis, who control most of Yemen.
Israel, the US, most European countries, and their regional Arab allies of Jordan, Saudi Arabia, Egypt, Morocco, the UAE, Kuwait, and Bahrain are on the other side. However, widespread anger against Israel is forcing Washington’s Arab allies into a more neutral stance.
That means it will be the US and Israel who will likely be doing the actual fighting against Iran and its allies should the situation escalate, which is likely in my view.
Here’s how that could happen…
Hamas’ October 7th attack could be the spark that lights the region on fire. It has led to an Israeli ground invasion of Gaza with gruesome house-to-house urban warfare.
Hezbollah in Lebanon is orders of magnitude more powerful than Hamas. It has made no secret that it intends to open a second front for Israel in the north if Israel appears to be successful with a ground invasion of Gaza.
The US has signaled that it could get involved if Hezbollah does.
The war spreading to Lebanon would likely bring neighboring Syria, which is allied with Hezbollah, into the conflict. Israel has already bombed the international airports in Damascus and Aleppo in Syria several times.
Iraqi militias, pro-Iranian forces in Syria, and the Houthis in Yemen have already launched attacks against US bases and other targets, signaling their readiness to enter the conflict.
However, there is only a limited amount of damage Israel can do to Iran—short of using its nuclear weapons. That’s because there is a distance of more than 1,000 kilometers between them. The best Israel could do is a couple of limited airstrikes, which would spur Iran to retaliate on Israeli territory with its precision ballistic missiles.
This means the US military would have to do the heavy lifting in a war against Iran. The US has made clear that it will join the war if Iran does.
War with Iran means the Strait of Hormuz, the world’s most important energy corridor, comes into play. Further, Russia and China are standing behind Iran with overt and covert military and economic support.
In short, there is a good chance the situation will escalate into a full-blown regional war because neither side appears willing to back down, which means escalation is likely.
The underlying geopolitical dynamics will keep the region unstable even if the current conflict does not lead to a regional war.
Tensions have been building for a long time in the Middle East as the geopolitical momentum has turned in favor of Iran and its allies in recent years.
The US and Israel find an empowered Iran intolerable and have been eager to find a way to knock Tehran and its allies down. They could now have their chance. The Israelis have not been shy about their intentions to go after Iran, which they regard as the source of many of their problems. Sooner or later, I expect them to act.
Here’s the bottom line as I see it.
The previous status quo in the Middle East is not tenable.
Either the US and Israel knock Iran down—which would require winning an uncertain regional war—or they cede the Middle East to Tehran and its allies.
Either outcome would be a geopolitical disaster for the US.
Ceding the Middle East to Iran means giving up on the petrodollar system, which serves as the bedrock for the US financial system, and putting the existence of Israel into doubt. Accepting that outcome is politically impossible for any US politician.
However, as the Millennium Challenge 2002 war game showed, going to war with Iran could mean the US military suffers a crippling defeat.
My guess is that the US military will try to avoid war with Iran for as long as possible but will eventually be forced to take action in a last-ditch effort to save Israel and the petrodollar system. Even then, there is a good chance they will lose it all anyway.
The implications of all of this are immense and historical. They won’t be confined to the Middle East.
In short, we are only one escalation away from potentially the biggest oil shock in history.
Unfortunately, most people have no idea how close we are to a catastrophe of historical proportions, let alone how to prepare…
That’s precisely why I just released an urgent new report with all the details, including what you must do to prepare.
It’s called The Most Dangerous Economic Crisis in 100 Years… the Top 3 Strategies You Need Right Now.
Click here to download the PDF now.
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