The Next Global Crisis Is Already Underway

Prepare Your Portfolio for $200-Plus Oil

War in the Middle East—did anyone have that on their bingo card for 2023?

I didn’t.

And that just goes to show why I always want my portfolio loaded for bear. Or in this case, loaded for black swans.

Now, truthfully, the Israel/Hamas crisis isn’t yet technically a “War in the Middle East,” so it’s not technically a black swan event—one that is unforeseeable and, thus, shocking. While Hamas’ well-organized and enveloping attack was shocking, it certainly wasn’t unforeseeable. I mean, this was always a possibility, given the history in this part of the Levant.

I won’t be diving into who’s right/who’s wrong here, or the sordid and century-long history of Western-fueled animosity between Israel and Palestine. I will only say that, to this point, the conflict is contained to Israel, and particularly a sliver of southern Israel known as the Gaza Strip.

Problem is, this contained conflict has all the right ingredients for a very real, regional war to kick off.

Such an event would absolutely draw in Iran, so eager to annihilate the Jewish state that it’s metaphorically crouched on the edge of the ring, just waiting to tap in. Hezbollah, an Iranian-backed militant group, is already causing mischief along Israel’s northern border with Lebanon, where Hezbollah is based. Hezbollah leaders seem eager to start lobbing some of the 150,000 rockets it harbors into Israel.

Syria, meanwhile, is clearly itching to scratch at Israel in various ways, too.

If those troublemakers start making trouble, then it’s a safe bet that Europe and the U.S. would stand alongside Israel.

Maybe even draw in the Saudis, who, religiously speaking, are mortal enemies to Iran, and who have made their peace with Israel. The Emiratis, meanwhile, have started warning Syria to keep its nose clean, and could join the fray on the side of Israel if the poop hits the propeller.

Maybe even Russia involves itself to a small degree as an ally to its regional friends, Iran, Syria, and Lebanon. Of course, the Putin Kingdom is deeply mired in a Rock’em Sock’em Robots match with what the Russkis wrongly thought was an inferior opponent in Ukraine. So maybe Russia is a bit player here…

Of course, whether any of this handwringing materializes… no idea.

But the fact that all these pieces are now in play underscores the fragility of the 2020s, and is the best calling card I can think of for why one might want a portfolio packed with insurance. That insurance, as I regularly preach, includes Swiss francs, gold, and bitcoin… and, in this particular case, oil.

We’re not even a full three years into this decade and already it’s shaping up as one that students of history will be studying later in this decade, much like I studied the Great Depression in school.

We had the pandemic. We had the devolution of America into warring clans that hate each other. We’ve seen democracy backtrack globally. We had—well, still have, frankly—the worst bout of inflation in 40 years. We saw oil prices track below $0, only to soar to record highs north of $120 per barrel. We saw the global supply chain—the lynchpin of the world’s “just in time delivery” philosophy—collapse, causing all manner of disruptions, from computer chips for cars to fresh vegetables and meats.

We saw a land war emerge in Europe for the first time since World War II ended nearly 80 years ago.

And now we’re on the cusp of a regional war in a part of the world that would cause immeasurable harm to the global economy.

A full-on war here will very likely send oil prices to astronomical levels—by which I mean $200, probably more.

That would plunge the global economy into a depression. A Greater Depression? Maybe. Or maybe the world is more resilient today than it was in the 1930s.

Not that I want to find out.

Because no matter what anyone predicts, $200-plus oil is going to cause painful shortages of food… painful shortages of products and parts for the world’s various manufacturers… painful shortages of consumer products… painful shortages of medical equipment and medicines, or least rapidly escalating costs for those (you’d be surprised at the number of medicines reliant on petroleum byproducts, including aspirin).

Inflation would soar. Hugely!

In that moment, no amount of Fed tightening or loosening will do anything other than exacerbate the problem.

And, so, Swiss francs and gold have been rising since Hamas’ attack. Bitcoin has held its own, proving that it is increasingly seen as a safe-haven asset.

Oil has been inching higher, too. It hasn’t yet rocketed because of cautious optimism that global and regional leaders (the U.S., Europe, Saudi Arabia, the UAE, China) will successfully keep the conflict from morphing into a war.

But if we start seeing the Brent and West Texas Intermediate benchmarks nose past $95 per barrel—they’re both mid- to high-$80s at the moment—that’s a message the markets are increasingly worried that diplomacy won’t save the day.

All of this to say: This is why I regularly urge my readers to own safe-haven assets in their portfolio. For moments like this.

Investing is as much about preparing for the bad times as it is trying to earn a buck off the good times. And the 2020s promise to be a decade-long string of bad times.

Prepare your portfolio accordingly.

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