War’s Effects on Gold, Oil, and Markets

If you had told someone at the beginning of 2022 that Russia would invade Ukraine, they wouldn’t have believed you. The idea that in this day and age any country would just unilaterally attack another country that hadn’t threatened it seemed absurd. Yet a few months later Russia attacked Ukraine, a fight that continues today.

Similarly, if someone had told you at the beginning of this year that Iran would attack Israel, that too would have seemed far-fetched. After all, Iran seems to have mastered war by proxy, and has numerous ways to get at Israel without resorting to war.

Yet now Iran has attacked Israel for the first time in recent history. While the attack was seen as largely symbolic and ineffective, it nevertheless raises tensions in the Middle East and risks escalating the conflict in Gaza into a wider regional war.

No one likes war, which is understandable. And so markets have reacted to the possibility of more conflict as you would expect they would.

The two questions everyone has now are, will this conflict actually grow, and could this be the spark that sets off a worldwide market meltdown?

Stock Market Losing Streak

Stock markets in the US were already having a tough week last week before Iran launched its attack. And the threat of further fighting that could draw in the US, Russia, China, and other major powers didn’t do anything to help things.

Any further fighting in the Middle East could weigh down markets even more severely, as it could bring the US into the mix. US forces already took part in shooting down Iranian missiles and drones, and any further involvement from US forces could spark backlash.

Just look what happened this week as pro-Palestinian protesters shut down traffic in numerous cities around the country. A full-blown US entry into war could risk not only attack on US forces in the Middle East, but also the potential for terrorist attacks here in the US.

If that were to happen, markets could take a nosedive. But right now we’ll just have to wait and see what happens in the coming weeks and months, and wonder how markets might respond.

War and Oil

With the Middle East being both a production area and transit point for much of the world’s oil, it’s no surprise that oil prices have been rising in recent weeks as the threat of war intensifies.

There have already been issues with shipping through the Red Sea as the result of Houthi attacks on commercial shipping, but an all-out war in the Middle East would make most of the region’s waterways highly risky to commercial shipping, including to oil tankers.

If tensions between Israel and Iran were to intensify, and Arab nations jumped into the fray against Israel, it’s not inconceivable to think that there could be some sort of oil embargo against the West. This is something that we haven’t seen since the 1970s, but it’s still a possibility.

It’s somewhat interesting how the 2020s are mirroring the 1970s in many ways, from high inflation to economic malaise to Middle East crisis. The 1970s of course were famous for stagflation, and one of the major fears is that this decade too could see a return to stagflation which would be difficult to combat.

Gold’s Resurgence

While the 1970s stagflation was a severe crisis that harmed many American households, there was one particular bright spot during that decade: gold.

Even in the face of inflation that reached over 10% per year, gold maintained an average annualized rate of growth of over 30% per year over the course of the 1970s. That provided at least some growth potential for investors who were frustrated with the ups and downs of stock markets during that decade.

Today gold is responding to the threat of crisis by continuing to stay near all-time highs. It broke above $2,400 an ounce last week and has headed back towards $2,400 again this week.

Between the threat of war and the threat of recession, demand for gold remains strong, and gold should continue to perform well through the end of the year and beyond. Many analysts now expect gold to hit $2,500 before the end of the year, which doesn’t seem too far off.

And if the Middle East were really to break out into an all-out war, expect gold to surge just like it did in the aftermath of Russia’s invasion of Ukraine in 2022.

How Likely Is an All-Out War?

No one today thinks that the Middle East will break out into a huge war, much less one that starts World War III. But then again, no one thought that an assassinated Austrian prince would result in one of the largest wars in history, one that would end several centuries-old monarchies.

The future is uncertain and unpredictable, and while we may be going about our business today without a care in the world, tomorrow, or next week, or next month, could see an escalation in conflict that could end our way of life as we know it.

It’s that uncertainty that is helping fuel demand for gold, as more and more people are looking to keep their assets safe against loss. Threat of war is certainly becoming a larger factor, but there’s still the threat of recession at the back of many people’s minds.

If you’re looking to protect your savings and investments from recession, inflation, or war-related loss, maybe it’s time to start thinking about buying gold. There are numerous gold coins and gold bars available on the market today, and purchase options ranging from direct cash purchases to gold IRAs.

No matter how large or small your gold purchase is, Goldco has options available for you. We work with mints around the world to bring you high quality IRA-eligible gold coins and bars in a variety of sizes and designs.

With over $2 billion in precious metals placements and thousands of satisfied customers, we’ve helped numerous people benefit from adding gold to their portfolios. Call Goldco today to find out how you can benefit from owning gold.