The Fallout From The Iranian Elections

You no doubt have heard approximately ten times as much analysis of the Iranian elections as you would like. So, I won’t bore you with any more. I don’t know enough about the internal politics of the country to do it anyway. But I do want to suggest a rather disquieting scenario that might ensue as a result of the outcome of the election.

I suspect that Mahmoud Ahmadinejad’s reelection pretty much ensures an Israeli attack on Iran’s nuclear facilities. The possibility that his opponent who was thought to be more moderate would prevail may have been the only thing that has been holding them back. Or it may have been that the Obama administration insisted on restraint until the election results were known.

Whether the elections were rigged or not is inconsequential. In fact, if they were rigged it only further supports the thesis that the religious clerics are firmly behind Ahmadinejad’s nuclear ambitions. What is clear is that nothing now stands in the way of Iran’s effort to become a nuclear armed state.

The Israeli’s have no real option but to take out the industry. In fact, time is growing short as the Iranians with the help of the Russians have been hurriedly upgrading their air defenses. There will be some diplomatic circuses to be sure, but the die seems to have been cast.

If you want to play this one, oil is the obvious choice. Depending upon the extent of the war that ensues, there could be just a psychological bump up in price or it could skyrocket given major supply disruptions. Overall economic growth and economic recovery would take a serious hit, so some general short positions probably would profit. From there, you have to project just how broad the conflict would become and what sides various countries decide to take.

Let me know if you have any ideas about how to play this one.

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