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Paulo Santos
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I am a Portuguese independent trader, analyst and algorithmic trading expert, having worked for both sell side (brokerage) and buy side (fund management) institutions. I've been trading professionally for about 20 years and also launched in 2004. Thinkfn (Think Finance) carries... More
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  • The War On Iran Has Already Started 0 comments
    Jan 19, 2012 11:04 AM | about stocks: USO, SPY, DIA, QQQ
    A lot has been written on how the U.S., or perhaps even more likely, Israel, might hit Iran's nuclear facilities in an attempt to delay or destroy Iran's nuclear ambitions.

    It's not a secret that Israel can't have an unstable neighbor bent on its destruction getting nukes. It's also not unprecedented for Israel to strike at that same threat, with strikes on Iraq's Osirak reactor back in 1981, and similar attacks on Syria's nuclear program during 2007.

    However, Iran's program is much larger, much more dispersed, farther away, and Iran has a lot more military might, if not to strike back at Israel, at least to try and disrupt oil commerce in the region, namely through attempts to close the Strait of Hormuz.

    If strikes on Iran do occur, a large, negative, stock market impact can be expected. Likewise, a large spike on crude prices can also be expected.

    The war has started already

    While open military strikes cannot be ruled out, their consequences are grave enough that considerable political resistance is to be expected. On the other hand, however, we might also say this war has already started.

    Why do I say this? Because in the last few years an epidemic of bomb blasts has been hitting Iran's key personnel working on its atomic project. Surely, these are not coincidences, and as such we can already speak about the war having started, even if through a low-level engagement.

    This has not gone unnoticed in Teheran, and now talk has started about retaliation. Still, market-wise one would expect that only a hot, open, visible war would have impact. Yet, what sometimes starts out as a silent conflict can also escalate into a full-blown war.


    The Iran war has already started even if the conflict is not on mainstream news. As long as it remains a silent war, its impact on markets will probably amount to nothing.

    However, beware of possible escalation into a hot war, and the spike such could bring to crude USO, as well as the negative impact it would have on the stock market. I would rate the likelihood of such event as still low, but would recommend against writing puts on the market, namely the main ETFs SPY, DIA and QQQ, as well as against writing calls on USO or other crude ETFs.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: market-outlook Stocks: USO, SPY, DIA, QQQ
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