Oil prices spiked nearly 4% overnight after the United States killed Iran's top general, Qasem Soleimani. But that's just the start if Soleimani's death leads to a larger conflict between the United States and Iran.
We're forecasting that oil prices could double.
But it won't happen automatically.
You'll need to keep an eye on one specific trigger...
What War with Iran Means for Oil Prices
Oil prices are up and stocks are down today - the Dow plunged 300 points this morning - for one simple reason: uncertainty.
We simply don't know what's going to happen next, but traders know something will happen.
And when we're talking about a region that produces nearly 40% of the world's oil, the stakes are high.
You see, Iran has already been using the chaos in Iraq after the American invasion to expand into its historic rival's territory. The two countries went to war in 1980, killing hundreds of thousands of people and destroying over $1 trillion between the two countries. And it sent oil prices skyrocketing 110% higher between March 1979 and June 1980.
That history helps explain why a powerful Iranian general was killed in an air strike at an Iraqi airport yesterday.
But a conflict between Iran and Iraq could be much different this time: The United States will be directly involved. Iraq relies on the United States for protection right now, which means a repeat of 1980 is unlikely.
While the Iranian army is the biggest in the Middle East, the U.S. military is still the world's premier force. That makes a traditional war between Iran and the U.S. a lose-lose proposition for the Iranians.
But Iran can still retaliate against the United States.
Over 25% of the world's oil and 33% of the world's natural gas passes through the Strait of Hormuz. This is the only sea route between the Persian Gulf and open waters, and its shipping lane is a mere two miles wide at its narrowest point. Iran could close off this shipping lane by attacking oil tankers passing through or laying mines across the passage.
That would create a global energy crisis and send prices soaring.
In fact, Money Morning Global Energy Strategist Dr. Kent Moors predicts oil prices would surge 10% on the immediate news of Iran closing the strait and could soar if the conflict continues. Remember, oil prices doubled the last time Iran went to war, and this could be even worse.
But you don't have to sit idly by. You can get ahead of the storm and make money, especially if you see Iran moving to close the Strait of Hormuz.
We have three ways to do it...
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First, buy the United States Oil Fund LP (NYSEArca: USO) as a hedge. You could double your money if oil prices do spike, and that can guard against losses elsewhere.
Second, follow Kent for up-to-the-minute details.
You can have Kent's updates sent directly to your inbox by clicking on the button below.
Third, look at ways to profit from the U.S. military superiority. Defense firms supply the United States with the technology and weapons it needs to stay on top. That means even more money flowing into the firms that supply these weapons.
Just like this defense contractor with a top-secret new technology...