Welcome to Week 11: The ASX200 is down -3% and Brent Crude is over US$100/bbl

Last week, I wrote it looked like the ‘initial shock’ of the Iran war was over when it came to the way the ASX was reacting to world events. That article was written in a simpler time, a more innocent time in the history of society, when we trusted more, left our doors unlocked, and checked in on our neighbours.

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In other words, it was last Thursday when I wrote that; at least I had the foresight to note ‘Trump does his best work on weekends.’ And that is what we’ve seen happen. Because out the gate Monday, the entire market is down over -3%.

Maybe that statement about doing best work on weekends matters more for Israel – we’ve woken up to a world where the price of Brent Crude oil is over US$100/bbl.

That suggests this war has a long time to go; it also suggests a massive uptick in inflation looms, and on top of all of that, there were concerns about recent U.S. jobs data, but right now, it’s a wartime market more than a market soberly digesting jobs data. At any rate, it’s been enough to put fear into the ever-fickle ASX200.

Don’t forget CBOE’s VIX index is up +70% over the last month, either.

New Israeli strikes on Iranian oil infrastructure, en masse, appear to be part of the investment calculus pushing up to those heights, and, confirming the not-even-worst fears of Westpac IQ analysts from Week 10.

On top of these fresh attacks on Iranian oil assets – which the U.S. is reportedly miffed with Israel about – we’ve also seen traffic through the Strait of Hormuz effectively cease (with ships risking the transit calling themselves Chinese), Iraq has confirmed 3MMbblpd of capacity is offline; and Qatar is expecting oil to hit US$150/bbl.

That would align with the even-worse-expectations of Westpac IQ analysts put out last week. (Not helping matters: Iran is also bombing other countries’ water desalination plants which, in the Middle East, is basically an attack on the capacity to sustain life itself.)

So what does all this mean? Well, it’s a good day to be an energy investor, even better to be a bullish oil derivatives trader, and a bad day to be just about anybody else.

There will be dip-buying and knife-catching abound; the smartest money of all might be withdrawing cash to put in a term deposit. Because when the oil price chart looks like this, nothing good can happen for the everyday citizen.

What the hell is this? Silver?

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