Will Iran attempt to throttle the 17 million barrels of oil that come through the Persian Gulf each day?  If so, energy traders have been acting so far as though a blockade affecting a third of the world’s seaborne supply is possible but not likely. Even though April crude surged sharply yesterday, its intraday peak failed by eight cents to breach a 62.37 Hidden Pivot target we’d been using as a minimum short-term price objective. April Gold similarly failed by a small margin to break above a bullish threshold at 667.60  that we’ve been monitoring closely. We should view both of these numbers as “fail-safe” limits, since, once they’ve been exceeded, both crude and bullion will be off to the races.

There has been much speculation about whether a war with Iran is coming. The nuttiest prediction so far was headlined “War in 30 Days!” at a Web site known as much for its virulently anti-Israel views as for its coverage of the precious-metals sector.  We strongly suspect the prediction arose not from any genuine certitude about an impending war, but rather from the author’s desire to vent his well-documented, deep hatred of Israel in an editorially permissible way.

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While the author expressed (feigned?) absolute confidence that Israel would launch such an attack, I can tell you for a fact he was not so confident that he was willing to bet $500 on it. The prediction was preposterous for a dozen reasons, including the obvious fact that, even if it were tactically advantageous – an assumption open to dispute, given Iran’s recent acquisition of state-of-the-art defensive hardware from the Russians -- Israel could never launch a war against Iran without the approval of the U.S. Moreover, were war with Iran to become unavoidable, the U.S. would never allow Israel to lead the charge – unless, perhaps, Israel were responding to a nuclear attack on its own soil.

Hormuz Threat

If there was never more than a remote chance Israel would attack Iran, especially under the bumbling, ineffectual leadership of Ehud Olmert, it’s becoming at least somewhat plausible that Iran might eventually goad the U.S. and Britain into doing it. While the recent taking of 15 British hostages was just one more such provocation to add to a growing list, any move by Iran to disrupt the flow of oil through the Strait of Hormuz would be more than a mere provocation – it would be an unequivocal act of war. It would also flout jihadist tactics; for while it’s one thing for stateless jihadists to conduct asymmetrical warfare against the West in a hundred countries, it would be quite another for a sovereign nation to train its missiles on America's Persian Gulf flotilla.  

Anyone who believes Iran incapable of such foolhardiness has underestimated the country’s bellicose president, Mahmoud Ahmadinejad. I correspond with a few people who think the threat he poses to global stability is being hyped by the military-industrial complex just to drum up business. And then there’s the guy who predicted “War in 30 Days!” who appears to believe, as he once wrote me, that “Israel is a hundred times more dangerous than Iran”. Make no mistake, the price of oil is not rising these days because of what the world fears Israel might do.