Two things I’m thinking about today…

1. Here’s one way to stop any speculative fever developing in the stock market. Get a big war going.

That’s a real risk right now after the US attacks on Iran.

I can’t pretend to know much about the Iranian position here or even the implications of what’s happening.

I do know that Tehran has some sympathy in Moscow and Beijing. Is the world repeating the mistakes of World War One with all these little flashpoints that draw in more players?

This is an idea I’ll run by Greg Canavan, our editorial director here. He’s a lifetime student of the “Great War”.

If memory serves me correctly, the British and the French carved up the Middle East between them after the war. We’re still living with the effects today.

Iran’s been an important strategic point for thousands of years, but especially for the modern economy since oil was found there in about 1907.

That’s a fascinating story in itself, because profits from Australian gold financed the original discovery. Not many people know that.

Iran gave the British a secure supply of oil when the race was on to lock up the world’s most essential commodity.

Here’s a warning: my reading on a lot of this was long ago.

I do remember that one reason for the hardline Islamic regime is because the West helped oust a democratically elected Iranian leader called Mohammad Mosaddegh in 1953.

That led to the West putting in power the Shah of Iran, who in turn was useless and/or corrupt. That led to the Islamic Revolution as the Iranian people turfed their Western puppet out of town.

Iran today is directly descendent from this chain of events.

Don’t take it as gospel, but that’s the gist, as I understand it. Now here we are, with regional and global powers manoeuvring for advantage again today.

It’s all rather remote to us here in Australia, except little wars can become big ones, and oil is at the centre of it all.

As I understand it, too, most Iranian oil today goes to China.

That means China does have an interest in what’s happening here. Watch this space.

2. I made the comment last week that I don’t think about holding oil firms for the long term, in the sense of them being quality businesses that can compound capital for years, if not decades, like some of the truly great businesses of all time.

That said, you could easily speculate in oil shares right now, or even as a hedge against a price spike.

In fact, I’d strongly suggest you consider it.

The risk of an oil price spike is very real right now.

Iran is an important supplier to the global market. We know the Strait of Hormuz is a chokepoint too.

That said, it may not even matter if Iran does anything. The world is now on notice that oil supply is at risk of major disruption.

This will bias refiners and traders to store it…just in case it does happen.

Here’s something I learnt about the 2008 price spike, years ago.

There was actually a lot of physical oil around at the time. That surprised me when I read it. Oil was surging on the futures market, while oil tankers idled on the water. Crazy, really.

But the market ran way ahead of the physical supply and demand equation for reasons unique to that moment. In a different scenario, there would not have been a huge spike toward US$150.

I don’t see why the same thing can’t happen now. We got a decent surge after Russia went into Ukraine.

It took a release of strategic stocks to temper it. The recessionary conditions in China probably helped keep a lid on it all too.

Right now, as I understand it, the People’s Bank of China is juicing the Chinese markets with a lot of stimulus. That could add some extra fuel to the oil price as well.

Generally, I wasn’t thinking oil as a big play for 2025, at all. Trump’s recent attack just changed my mind.

If you’re interested in trading or investing around this dynamic, my colleague Jim Rickards put down a gameplan to benefit from this type of scenario before the Iran/Israel conflict even took off.

Go here. Don’t wait. Oil could be heading to US$100 a barrel, if not higher. $US200 is not out of the question.

Best wishes,

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

Murray’s Chart of the Day –
Brent Crude Oil Monthly Chart

By Murray Dawes, Monday, 23 June 2025

After an eventful weekend, it is surprising to see the muted response across markets this morning.

Perhaps the algos haven’t been programmed to know what to do when America bombs Iran’s nuclear infrastructure.

Iran’s parliament has voted to shut down the Strait of Hormuz, but apparently that is only worth a 2% jump in the price of oil this morning.

The decision to close down the Strait of Hormuz will ultimately rest with the Ayatollah, so I guess the market is in wait and see mode.

Brent crude has already jumped 24% over the last three weeks, which is a massive move for oil.

As I said last week, we need to see Brent crude oil close above US$75.43 this month to confirm a monthly buy pivot and shift the long-term bearish picture.

There is still a week to go until the month ends. A lot can happen in a week, so I will await that confirmation before shifting my bearish stance on oil.

In the chart above I have pointed out the lowest high in the current downtrend which sits at US$82.58. If the oil price jumps above that level in the short-term we could see some real fireworks.

The price of oil could spike even higher and faster than it has already above there.

But while it remains below that level there is still the chance we are in the final stages of the current run and selling pressure could return.

Regards,

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps