Obliteration Day

Oil prices will pop when trading opens this evening. That’s the expectation after America did what t’s president campaigned against – getting into another foreign war.

Right or wrong, consequences be damned, it’s done now. Your TFSA, plus the price of gas you pump and berries you buy, will likely be affected. The long-term goal is defanging Iran by ‘obliterating’ its nuke program. The short-term impacts may be something else. And there’s always the risk the US gets pulled into another neverendum conflict – by that wily Israeli, Bibi Netanyahu.

Since geopolitical brinkmanship and cogent strategy are above the pay grade of this pathetic blog, let’s stick to the practical stuff.

Is this toxic for your investments? Does it hurt Canada?

As stated, oil’s going up. From $73 US a barrel on Friday to eighty or $90. If Iran or its Houthi buddies throttle the Strait of Hormuz (where 20% of the world’s crude ships) the spike could last a lot longer and maybe go higher. Hundred bucks? Dunno. Nobody does. But for now, plan on energy costs flaring.

Those costs are a big hunk of the inflation calculation, so if this lasts – at the same time we’re dealing with punitive Trump tariffs – you can kiss 2% goodbye. This could possibly push interest rates higher in July, or certainly keep them at current levels.

On the other hand, ninety-dollar oil is good for Canada, since this remains our largest export. It’s good for the TSX, and your exchange-traded fund that reflects Bay Street. So far this year the Canadian market has been peachy – up almost 6.5% by this weekend. That’s a huge premium over the S&P 500 (ahead 1.7%, ytd on Friday).

Just as rich oil helps the Canadian economy, it’s misery for the American one. This puts more pressure on the White House and the Senate, where Trump’s crazy tax bill is being debated. That would slash government revenues, hurt a lot of entitlement spending and add more than $3 trillion to the deficit and debt (now at a stunning $36 trillion). The last thing Americans need is a big hike in the energy bill, but that probably came on the wings of the B-2s last night.

Brent futures have jumped 11% since Israel started to attack Iran (which we now know was meant to destroy certain assets that might have imperilled the American attack). West Texas popped about 10%. That much again could be in place by tomorrow – depending on how serious Mr. Market thinks the supply garroting will be.

Bloomberg reports today the cost of hiring a ship full of oil to travel from the Middle East to China jumped 90% since this mess started. Insurance costs are bloating like a lovesick sea lion. Shippers everywhere are bracing for the unknown.

And here’s an expert opinion, also from the news service in the last few hours:

“Much depends on how Iran responds in the coming hours and days — but this could set us on a path toward $100 oil, if Iran responds as they have previously threatened to,” said Saul Kavonic, an energy analyst at MST Marquee. “This US attack could see a conflagration of the conflict to include Iran responding by targeting regional American interests that include Gulf oil infrastructure in places such as Iraq, or harassing passage through the Strait of Hormuz.”

Now, the salient question is what you should do about it. The answer, as usual, is nothing. Not if you have a balanced, diversified and global portfolio. In that case you already have a healthy 30% Canadian equity component. You have fixed income – with prefs and REITs doing swell in recent months. And your US exposure will be just fine as The Orange King muscles the Senate into passing his irresponsible but lovable tax chops.

We’ve been down this road before. Too many times. Regional wars threatening to spill over. Nuclear stakes. Bully states. The US as the global cop. Israeli overreach. Arab terrorism. Rogue Russia. Through it all, markets have generally expanded as the global economy did. Monetary policy and corporate earnings remain more consequential than 30,000-pound bombs and presidential bravado.

The main thing is this: the future is uncertain, volatile and guaranteed to bring big change. That’s why smart people (like you, because you’re here) have 60% growth assets 40% safer stuff, a third equity exposure to Canada, the US and international, ETFs instead of stocks or mutual funds and tax-efficient returns in the form of dividends and capital gains, which eschews GICs or those non-high, high-interest account.

Let them bust bunkers. Not your future.

About the picture: “This is our 9wk old black lab Gertie learning how to chew sticks,” writes Mark, aka ‘The Loonie Dr’, ” with her big sister Beatrice.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/06/22/obliteration-day/