This is not good news.
This is not what you want to see happening, nor what anyone currently needs, especially given the powder keg that is geopolitics in 2019.
Yet this is the situation that the world now finds itself in, and it seemingly appears to be the direction that the "powers to be" are pushing us, setting the stage for rapidly rising gold and oil prices.
As we reported on, last week saw the unfortunate "Oman tanker" attack, in which Iran was blamed for attacking two commercial vessels near the Strait of Hormuz, a crucial transit and shipping route within the Gulf region. (Whether or not Iran was truly to blame is still yet to be seen.)
This attack enraged both the United States—who believes Iran is responsible for it—and Iran itself, who claims this was a "false flag" carried out by U.S. interests in an effort to see Iran further destabilized and come under increased scrutiny.
The fact is, we don't know who is right and who is wrong, but what we do know is the ramifications of these actions.
Hostilities have only continued to escalate since then, hitting a boiling point this morning when a U.S. military drone was shot down by none other than Iran.
Iran has taken full credit for this action and is not trying to deny it, as they claim the drone was illegally operating within their air space and they had every right to protect their borders and interests.
The United States, on the other hand, paints a very different story, stating that the drone was shot down in international airspace while operating over the Strait of Hormuz—meaning that this was a completely unprovoked attack.
Iran was fast to provide photo evidence, showing the drone plummeting from the sky after it was struck down within their borders. However, these photos were quickly disproved and shown to be from a previous military strike that occurred in 2017.
This news, plus strong signals from the FED indicating a rate cut in the near future, has caused oil to jump by over 5% and gold by 3.38% at the time of writing. Coming along for the ride, silver also surged higher, increasing by 3.57%.
That Iran showed the incorrect photos may have been an accident, but at this point, it doesn't matter. The error is rapidly spreading across global media and is being used against them, most notably by the United States, who claims this as proof that Iran is lying about the conflict.
On his twitter account, President Trump made the two following ominous tweets:
"Iran made a very big mistake!" and
"If Iran wants to fight, that will be the official end of Iran. Never threaten the United States again!
Make no doubt about it, the Neocons within the United States’ political establishment are going to be calling for blood and retribution, which in the end will not be good for anyone.
As I previously mentioned, 20% of the world's global oil supply flows through the Strait of Hormuz, making it a key strategic location for Iran and one they could easily disrupt if they so choose.
Iran knows this, and they are going to use it to their full advantage. However, so, too, does the United States and their allies. They will bring down their full might to ensure that global trade and production continues to churn along unhindered.
However, this won't be settled overnight, and we are going to see both gold and oil continue to surge higher, as uncertainty and fears escalate.
With a rapidly rising oil price, the cost of everything else will follow suit, as oil is in one way or another linked to the cost of all other goods, either directly or indirectly, such as in rising transportation costs.
What this means is that inflation will rear its ugly head—and in a serious way. In this scenario, $100 per barrel oil could easily become a reality once again, having a massive impact on the supply chain of all products.
Gold, the best hedge against inflation that this world has ever seen, is going to come along for the ride, possibly even shattering the $1900 per ounce level once again before moving on to new highs.
Hopefully, sanity will be restored and things can deescalate, but, unfortunately, this grows less and less likely with each new threat and each new act of aggression.
Get ready for rising oil prices, get ready for rising gold prices, get ready for increased uncertainty.