3FOURTEEN RESEARCH - A history of violence
“Violence, naked force, has settled more issues in history than has any other factor.” - Robert Heinlein
Last week, I emphasized the difficulty of predicting how geopolitical events - like the ongoing conflict between Israel and Hamas - will unfold. To quote: “The second-order effects of the Hamas attacks could easily pull Iran into the conflict. From there, we must consider Iran’s response to Israel’s counter. Notoriously, this could include blocking the Strait of Hormuz. How will all of this unfold? In short, I have no idea. Moreover, the worst oil commentators/predictors that I have ever encountered have been ‘geopolitical experts.’”
Our preference is to allow our objective/quantitative indicators guide our oil strategy. Still, a sense of history is useful when navigating these crisis events. In the table below, we list all significant geopolitical crisis events impacting oil-producing regions since 1987. Scanning through the historic cases, there are few straightforward conclusions. Of course, when a war directly involves a major oil producer (e.g. Iraq, Russia, etc.), oil’s initial spike continues higher and remains elevated. However, like the current Israel-Hamas war, most of these cases do not directly impact oil production. In these cases, the initial reaction typically gives way to the macro/fundamental backdrop.
