Middle East Regional Conflict Expands; Influenced by
Iran and Qatar
By the Curmudgeon with Victor Sperandeo
Middle East War Widens and Deepens:
As we previously suggested, the war in the
Middle East is expanding rapidly. That
presents a huge potential risk and danger for international stability, the
global economy and most markets.
“This is already a regional war, no longer limited to Gaza,
but already spread to Lebanon, Iraq, Syria and Yemen,” said Hugh Lovatt, a
Mideast expert for the European Council on Foreign Relations.
With the U.S. led air strike on nearly 30 sites in Yemen on
Thursday and a smaller strike the next day, there is no longer a question of
whether there will be a regional conflict. It has already begun. The biggest
questions now are the conflict’s intensity and whether it can be
contained. Here’s a review of the two
significant events this year:
1. On January 2nd,
Deputy Hamas leader Saleh al-Arouri died in a drone strike, widely
blamed on Israel, in the Beirut suburb Dahiyeh (a
Hezbollah stronghold) in Lebanon. The
attack that killed Arouri was the first in Beirut following months of exchanges
of fire between Iranian backed Hezbollah and Israel, in response to the war in
Gaza. Up till now, these had largely been confined to Lebanon's southern
Hezbollah’s leader Hasan
Nasrallah described Arouri's death as a "major, dangerous crime about
which we cannot be silent. We are not afraid of war. Those who think of going
to war with us will regret it. War with us will come at a very high cost,"
Nasrallah said in a televised address with his photo below:
2. Last week, the U.S. and UK
twice attacked the Iran backed Houthi’s [1.] in Yemen. It was in retaliation for the rebel’s
indiscriminate attacks on commercial shipping in the Red Sea.
"These strikes are
in direct response to unprecedented Houthi attacks against international
maritime vessels in the Red Sea — including the use of anti-ship ballistic
missiles for the first time in history," President Biden said, adding that
he would "not hesitate to direct further measures to protect our people
and the free flow of international commerce as necessary."
On Friday, the Houthi movement's Supreme Political Council
vowed to continue targeting ships in the strategic waterways, adding that
"all American-British interests have become legitimate targets." See Late Update below.
That would result in further escalation. Britain stands prepared to carry out further strikes
on Houthi targets if commercial and military vessels continue to
come under attack in the Red Sea, UK Foreign Secretary Cameron warned on
Note 1. The Houthis are
a Yemeni militia group named after their founder, Hussein Badreddin
al-Houthi, which was formed in the 1990s as an opposition force to the Yemeni
government. They represent the Zaidi
branch of “Shia Islam,” in contrast to “Sunni Islam” which dominates most of
the Arab world.
In 2011, the Houthis played a major role in sparking the
Yemeni Revolution, which was born out of a wave of anti-government protests and
uprisings known as the “Arab Spring.”
The Houthis were displeased with the newly installed leaders and in 2014
the group took control of Sanaa, Yemen’s capital, prompting an ongoing civil
war that has ravaged the country for the last 10 years. Today, the Houthis retain control of Sanaa
and large swaths of territory in western Yemen.
An anti-ship ballistic missile fired by Houthi fighters
struck the M/V Gibraltar Eagle - a U.S. owned cargo vessel - off the coast of
Yemen on Monday, but the ship and its crew were not seriously harmed, according
to the U.S. military’s Central Command.
The UK Maritime Trade Operations, which oversees Mideast
waters, said Monday’s attack happened some 110 miles (177 kilometers) miles
southeast of Aden. It said the ship’s captain reported that the “port side of
vessel hit from above by a missile.”
Importance of Red Sea Shipping to the Global Economy:
The Red Sea serves as a strategic artery in world trade,
facilitating the movement of vital goods through the Suez Canal, one of the
most trafficked waterways on the planet.
Some 30% of the world’s container ships pass through the Red Sea. Hence,
the Houthi attacks on commercial shipping vessels leaving and entering the Red
Sea around the Bal al-Mandab Strait are a major threat to world trade and the
Multiple ships have been fired upon when passing through the
area since the Houthi attacks started in November. Despite the Houthi’s claim
to only target vessels linked to Israel, vessels under multiple flags have
found themselves targeted. Many carriers deem the risk too great and paused or
Volvo, Tesla, and other carmakers in Europe have suspended
production for a few days or more because of interruptions in receiving parts
as ships route around the Red Sea and Suez Canal. Maersk halted all Red Sea shipping after a Dec. 31st attack on
one of its ships. It has warned its customers to expect significant disruptions
and analysts expect higher prices to add to global inflation.
Diverting ships away from the Red Sea (redirected around the Cape
of Good Hope in South Africa) is causing delays of up to 40 days, said Lars
Jensen, chief executive of Danish maritime consultancy Vespucci Maritime. He
said the cancellation of regular services by French shipper CMA CGM through the
Red Sea would cause up to $40 million in weekly revenue losses to the Suez
Canal authorities. The canal receives around $170 million in weekly transit
fees on average.
Egypt has been hit hard
economically by the Houthis Red Sea attacks.
The Arab country’s main income source is the Suez Canal which has been
expanded and widened to accommodate more shipping vessel traffic. As an outcome
of Houthi attacks in Red Sea, many ships were re-routed, resulting in a 40%
decline in Egypt's Suez Canal shipping revenue.
Iran Holds the Islamic Terrorist Strings:
As we’ve explained in several Curmudgeon geopolitical posts, Iran
is the world’s biggest sponsor of Islamic Jihad terrorist groups, like
Hamas, Hezbollah, Islamic Jihad and the Houthis. In an interview with Forbes, Richard
Goldberg, Senior Advisor at the Foundation for Defense of Democracies said that
all of those proxies are controlled by Iran.
1. Hezbollah is Iran’s
most powerful proxy. Armed with Iranian
weapons and funded by Tehran, Hezbollah has forcefully taken over Lebanon’s
political and economic systems, turning the country into an extension of Iran. They also control the Abu Kamal / Al-Qa’im border crossing between Syria and Lebanon.
After the October 7th Israel attack by Hamas,
Hezbollah began a series of strikes from Lebanon, leading Israel to evacuate
over 250,000 citizens near the conflict in North Israel. In retaliation,
Israel’s air campaign has killed 19 Hezbollah members in Syria in three months,
more than twice the rest of 2023 combined, according to a count by Reuters news
agency. More than 130 Hezbollah fighters have also been killed by Israel in
Lebanon during the same period.
2. It’s well known that Iran has
backed the Houthis since the rebels began fighting Yemen's
Sunni-majority government in 2004.
Iran's money, intelligence, technology, and weapons have helped the
Houthis carry out attacks in the Red Sea. Indeed, Iran is promoting more Red
Sea attacks as they are arming and financing the chaos.
3. Iran and its Islamic
terrorist proxies operate freely in Iraq and Syria. According to the
Pentagon’s tally on Thursday, there have been a total of 53 attacks in Iraq
and 77 in Syria since Oct. 17th.
The U.S. military has retaliated on fewer than 10 occasions. U.S. officials worry that sooner or later,
one of the attacks will kill troops, and then the response would be much more
deadly and could spiral out of control.
4. The concept of an “Iran
Shia Crescent” may have seemed questionable when King Abdullah II of Jordan
coined it in an interview with the Washington Post in
December, 2004, but it is very relevant today.
Image Courtesy of Avi Melamed-
former Israeli intelligence official and Middle East expert commentator.……………………………………………………………………………………………………….
Will U.S. Attack Iran?
In December, Senator Lindsey Graham urged the Biden
administration to attack Iran.
"Without Iran there are no Houthis," Graham told Fox News on
Wednesday. "The Houthis are completely backed by Iran. I have been saying
for six months now...hit Iran. They have oil fields out in the open, they have
the Revolutionary Guard headquarters you can see from space. Blow it off the
If that did happen, it would greatly escalate worldwide
tensions since Russia and China are allies of Iran. Importantly, Iran would surely shut down the Straits
of Hormuz, most likely using mines to blow up ships there. We wrote in this
The strait is the only
sea passage from the Persian Gulf to the open ocean and is therefore one of the
world's most strategically important choke points….A
third of the world's liquefied natural gas and almost 25% of total global oil
consumption passes through the Strait, making it a highly important strategic
location for international trade. It has been so for centuries.
If the strait was closed, WTI crude oil would pop to $150
-200 within a few days. Gold would also rally
The Behind the Scenes Role of Qatar:
Qatar is envisioned by most as an honest peace broker in
Israel’s war in Gaza, but nothing could be further from the truth.
In an October 30th WSJ op-ed,
Meshal bin Hamad Al Thani, Qatar’s Ambassador to the U.S. wrote:
Over the past two
decades, our nation has cultivated a reputation for mediating complex disputes.
Lasting peace can be achieved only by building trust and understanding. The
foundation of our success has been our ability to engage with all sides.
Following the escalation
in Gaza, Qatar is in contact with all parties, urging calm. Our international
partners such as the U.S. have asked us to mediate to secure the release of
more hostages. We have been engaged with Israel, other countries, and
How can Qatar be an honest peace broker when it has
transferred more than $1.8 billion to Hamas and the two leaders of that Islamic
terrorist group live there?
We submit that Qatar is Hamas' most important financial
backer and foreign ally. In 2012,
Qatar hosted the Hamas party leadership when Hamas head Khaled Meshal relocated
from Syria to Qatar. The current head of Hamas, Ismail Haniyeh, has resided in
Doha since 2016.
From a November 7th NY Post article titled, Hamas leaders worth staggering $11B revel in luxury —
while Gaza’s people suffer:
The emirate has long
welcomed the leaders of the terror group and installed them in its luxury
hotels and villas at the same time as it hosts a vast American military
presence...Hamas runs an office in Qatar’s capital, Doha, and leaders Ismail
Haniyeh, Moussa Abu Marzuk and Khaled Mashal maintain
a luxurious lifestyle.
Victor on Qatar:
Qatar has underappreciated economic, religious, and monetary
power. The oil rich Arab nation has a $500 billion sovereign wealth fund. With
only 400,000 citizens (2.5 million migrants work there) they have the highest
per capita GDP in the world.
The Emir (ruler) of Qatar is Sheikh Tamim bin Hamad Al Thani,
reigning since 2013. It’s been reported
that he was heavily influenced by Iraq’s invasion of Iraq in August 1990 to be
friends with everyone to safeguard Qatar and ensure they would not be attacked.
Qatar seems to buy everyone, one way or another. As a result,
they have tremendous global influence and impact. For example:
Al Jazeera Media
Network is owned by QMC, the official state broadcaster of the
Qatari government. Al Jazeera is second
to the BBC in size and influence of any global news media outlet. It has a
global audience of over 430 million people, broadcasts in more than 150
countries and territories, and is available in over 430 million homes. Many
critics have questioned the independence of Al Jazeera given that the outlet
was founded by the Qatari government, receives about 90% of its funding from
the Qatar government allowing it to operate at a perpetual financial loss, and
is run by Sheik Hamad bin Thamer Al Thani, a member of the Qatari royal house.
The U.S. has one of its
largest Middle East military bases in Qatar.
Qatar is the main supplier of
Natural Gas to the EU.
Qatar owns more property in London
than anyone and heavily influence the city’s economics and politics.
Quatar owns 10% of Volkswagen
and thereby has a say in Germany’s affairs.
They own 100% of France ‘s
PSG (aka Paris Saint-Germain) Football Club which competes in Ligue 1, the top
division of French football (which is called soccer in the U.S.).
Qatar gives billions of
dollars to major U.S. universities, like Harvard and Cornell, to influence
professors and students.
Perhaps you can now appreciate how this Islamic Arab nation
plays everyone and controls important institutions of power. They seem to be able to do whatever they want with no
Victor’s Market Comments:
On Friday, March Crude Oil closed up
+1.35 at $72.79 after hitting $75.28. Normally, these markets rally strongly
then fall back after the initial news.
The closing high on Feb Gold is $2093.1 with the yellow metal
closing up by +$32.4 on Friday at $2,051.6. Gold was mostly flat on
the week but extended its run above the $2,000 level to nearly a month. On
Monday, January 15th, Feb Gold futures were +$7.40 at $2,059.00.
Technically, Gold is on the verge of “breaking out” to the
upside. That would normally result in a 20% up move under current geopolitical
tensions. Also, central banks have been big buyers of Gold, so the
yellow metal is in strong hands.
Next week will be important to watch for an acceleration of
the Middle East war, which would cause continued price appreciation in both oil
As of last week, it looks like the war in the Middle East will
continue to gather momentum. If Iran is not stopped from having their proxies
launch these guerilla attacks, more chaos will ensue.
As there’s been no serious peace talks, it seems that certain
groups and people want war. That is why owning oil (and or oil stocks) and gold
as insurance is prudent.
As Curmudgeon readers know, I am a long-term investor in
Gold, but do not trade it. That said, I recommend at least a small allocation
(5% or more) as a hedge against global chaos which is increasing.
“I am concerned for the security of our great Nation; not so
much because of any threat from without, but because of the insidious forces
working from within.” by Douglas MacArthur
Douglas MacArthur was one of the few individuals to achieve a 5-star rank, served in World War I, World War II, and the Korean War. A recipient of the Medal of Honor and 17 other medals, he distinguished himself as a talented, brave military commander.
In our 13th year of collaboration, Victor and the
Curmudgeon wish you the best of luck, good health, and success in 2024. Till next time………….
Follow the Curmudgeon on Twitter @ajwdct247
Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.
Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies, and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.
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