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Ex-CIA Warns of War in Middle East -- What’s the Economic Impact?

|Includes:DBA, DBB, DBC, GLD, SLV, The United States Oil ETF, LP (USO)
Former CIA official Bob Baer, known for being the agent who served as inspiration for the main character of the film Syriana, made headlines today stating that he expects Israel to attack Iran in September.

How will this impact financial markets and the global economy? A few ideas:

Higher prices in precious metals and commodities; think GLD, SLV, DBA, DBB, DBC, USO. War tends to be bullish for commodity prices, due to supply destruction via usage by military forces as well as by destruction of enemy supplies. Oil prices, or even sensitivity on the part of the market resulting from news and rumors, could impact prices along the entire energy sector.

This case is reinforced by price action; in the chart below, note the pattern of higher lows forming while the daily range is consolidating -- basically an ascending triangle pattern.

On the right news event, I think oil is poised to make a break out higher, and revisit its previous recent high at around $114, and likely higher from there as the trend of inflationary monetary policy resumes.  I believe downside risk is capped at $88, and would not that expect that level to be breached barring some type of sincere political desire to accept a deflationary spiral coupled with significant withdrawal of US troops from military bases around the world.

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