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Courtesy of Daniel Sckolnik, ETF Periscope

“Do the difficult things while they are easy and do the great things while they are small. A journey of a thousand miles must begin with a single step.”Lao Tzu

At the rate things are going, it seems likely that oil won’t find itself below the $100 per barrel price level anytime soon. And, while you can blame Iran for being the straw that stirs the current brew of high crude prices, it is clearly the speculators that are driving the prices up to the highest levels in over nine months.

Crude oil gained 6% on the week, ending Friday at just a notch shy of $110 per barrel. It is obvious that there hasn’t been a sudden and urgent increase in demand for the stuff, as growth has been fairly minimal on both the domestic and international front. The source of movement of the commodity has essentially emanated from the machinations within the political arena, not the increased demands of the manufacturing sector. The jacked-up prices can be traced to the place where speculators thrive, as they are essentially betting that the threat of a broken supply chain will be all it takes to keep the price near or above its current level, for the short term, anyway.

The problem of the moment revolves around a string of events resulting from the U.S. and the EU attempting to rein in Iran’s nuclear intentions. The tool of choice for the allies has been a new round of sanctions, including the freezing of Iranian assets by U.S. banks and an Iranian oil embargo promised by the EU. The Iranian government has responded predictably, rattling its sabers and swearing to block the crucial oil shipping lanes that pass through the Straight of Hormuz.

As even the casual observer of the Middle East can attest, it doesn’t take a whole lot of threats and counter-threats swirling around the region to send the cost of crude high and higher. And, with a crucial round of elections scheduled for next week in Iran, the stage is set for amplified hostilities, even if it remains in the realm of verbal-sparring.

Toss an ever-edgy Israel into the mix, and the global markets cannot help but be impacted by fear and doubt….
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