With tensions in the Persian Gulf on the rise, the collapse in oil prices that we've been predicting may take longer than originally anticipated. There are three U.S. carrier groups within striking distance of Iran right now, and two more reportedly on the way. This is unprecedented, although you'd have to search the web and the newsletter world to find any mention of it. Gary North thinks that the news media have deliberately chosen not to report the naval build-up for fear of starting a panic that could push oil to $200-per-barrel, wrecking the already frail U.S. economy. But we think reporters have simply been too busy obsessing over the Olympics and the meaningless political spectacle in Denver to care about what is going on in the geopolitical world. Whatever the case, the build-up is big news, especially since President Bush has yet to even acknowledge it. What's on his mind? Although it's possible to infer that an offensive against Iran is imminent, we doubt that Mr. Bush would attempt anything so bold with just five months left in his term. Nor is Israel likely to launch a pre-emptive strike without U.S. backing. There are tactical reasons as well for thinking that an air strike against Iran implausible, not least of which is that such an operation could trigger a regional conflagration while failing to destroy Iran's supposed nuclear weapons program. It seems more likely that the U.S. flotilla is intended to give Iran second thoughts about disrupting the flow of oil through the Strait of Hormuz. Tactically speaking, Iran must surely know that the much higher energy prices that would result would tip the U.S. economy over the edge. Even if this were Iran's goal, it would come at a grave price to the country, since, with no oil
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