Iran So Far Away: War Drums Beating in the Middle East Are Getting Louder

With the prospect of Iran's potentially developing missiles that could reach the U.S., the tension in the Middle East related to Iran is suddenly starting to feel ominously close to home.

According to an article published Feb. 2 written by the Christian Science Monitor's Howard LaFranchi, "The missile under construction at an Iranian research-and-development facility, which was damaged by a mysterious explosion in November, was a long-range missile prototype with a range of 6,000 miles -- enough to hit the United States, a senior Israeli official said Thursday in a speech to a defense and security forum." With such weaponry in mind, "The West does not yet realize how much of a threat is posed by Iran".

Aside from missiles, Iran is beginning to flex its developing technological muscles in other ways. The Associated Press' Nasser Karimi reported on Feb. 3 that "Iran successfully launched a new small satellite into orbit...the latest in the country's ambitious space program that has raised concerns in the West because of its possible military applications." Iranian President Mahmoud Ahmadinejad commented that he was "hopeful this act will send a signal of more friendship among all human beings."

That being the case, friendship among all human beings seems to be a far fantasy in light of recent comments from Iran, Israel, and the U.S. as to the prospect of a coming war in the Middle East. According to Bloomberg, a recent report from Washington Post columnist David Ignatius suggests that US Defense Secretary Leon Panetta "believes there is a strong likelihood Israel will strike in April, May, or June." Bloomberg: "Panetta and other US officials have repeatedly warned Israel not to act alone."

According to a report from Tehran's Press TV on Feb. 2, Ahmadinejad is now calling for a "new world order of justice-seeking nations, to replace the existing Western-dominated liberal status quo." From the article: "The Iranian chief executive stated that the world's dominant powers deliberately bully the smaller nations, who are not in conflict with one another, thereby creating artificial problems between them." Per Ahmadinejad's comments, a possible new world order would need to be "all-inclusive" and not "dominated by any particular single nation." What exactly Ahmadinejad's conception of a new world order entails remains uncertain.

Even aside from satellites and calling for a new world order, Breitbart reported on Saturday that Iranian naval ships are now docked "in the Saudi port city of Jeddah on a mission to project the Islamic republic's 'power on the open seas'." According to the article, an Iranian naval commander said that Iran's "mission aims to show the power of the Islamic republic of Iran on the open seas and to confront Iranophobia."

Perhaps one of the most ominous pieces of news to come out of Iran recently was in a recent article from conservative-leaning WorldNetDaily. According to WorldNetDaily's Reza Kahlili, Iran's supreme leader Ayatolla Khamenei is warning the world "of a coming great event." Khamenei declared, "In light of the realization of the divine promise by almighty God, the Zionists and the Great Satan (America) will soon be defeated." According to the article, Khamenei has declared "the current century as the century of Islam and promised that human history is on the verge of a great event and that soon the world will realize the power of Allah."

Whereas harsh words and saber-rattling is not new in the relationship between Israel & the US and Iran, the latest string of comments come as a heightened form of what some may call "psychological warfare". That being the case, MSNBC reported Sunday that Pres. Obama said during a live interview with TODAY's Matt Lauer that diplomacy remains the "preferred solution" in dealing with Iran and "averting a potential arms race in the Middle East." Obama: "I don't think Israel has made a decision. I think they, like us, think Iran has to stand down their nuclear weapons program. Until they do, I think Israel is going to be very concerned, and we are as well." Obama also commented, "We are going to make sure we work in lock step and work to resolve this, hopefully diplomatically." Nevertheless, Obama reiterated that "we're going to do everything we can to prevent Iran from getting a nuclear weapon and creating an arms race, a nuclear arms race, in a volatile region."

In terms of trading, the commodity most likely to be influenced by the saber-rattling of the Middle East is, of course, oil. Interestingly enough, even with the intensified salvos of words on both sides, the current price of West Texas Intermediate (WTI) crude oil remains below $100 per barrel. In fact, through the course of this latest string of so-called "psychological warfare", the price of WTI crude has declined. In comparison, Brent Crude is currently trading at $114.58 per barrel, and has recently risen in price. If the situation in the Middle East becomes increasingly hostile in the coming weeks to the point of taunting and intensified military maneuvers risking a violent military encounter, the price of oil could possibly rise in the near future. Either way, it appears unlikely that this ongoing conflict will go away anytime soon, and as the war drums are getting louder, their resonating sound seems to be getting closer and closer to home.

ACTION ITEMS:

Bullish:
Traders who believe that oil prices will rise in the near future translating into higher gas prices at home owing to uncertainty in the Middle East might want to consider the following trades:

• Check out PowerShares DB Oil Fund ETF DBO, PowerShares Dynamic Oil & Gas Service ETF PXJ, iPath S&P GSCI Crude Oil Total Return OIL, and ProShares Ultra DJ-UBS Crude Oil UCO.

• Traders could also check out companies like Chevron Corporation CVX and Exxon Mobil Corporation XOM.

Bearish:
Traders who believe that oil prices will remain stagnant owing to possible diplomatic options in Iran or countervailing actions taken in the Middle East by other oil-producing nations to deal with a possible Iranian crisis may consider alternate positions:

• Traders could choose to simply sit this one out until things stabilize and a direction becomes clear.

• Traders looking for a stable commodity to wait out a possible storm in the Middle East can check out gold and silver in the form of ETFs and physical coins & bars.

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