Understanding the Middle East: A Trader’s Guide
Famous for being a center for oil production, the Middle East has, for centuries, been a crossroads of culture and commerce.
In the modern era, the land that joins up Morocco with Afghanistan has been seen as a crucial cradle of world power – and events in this far-flung land have always had an effect on the market in the US and beyond. In this short guide, we’ll look at events in the Middle East, and how they might affect your trading activity in the future.
Conflict
The Middle East has, unfortunately, become synonymous with conflict in recent years. The invasion of Iraq in 2003, more recent civil wars in the Arab world, and the ongoing proxy conflict between Saudi Arabia and Iran, representing two different interpretations of Islam, have all contributed to a region which has become famous for its instability in recent years.
Add to this the Arab Spring in 2011, and the resultant toppling of dictators, and the Syrian Civil War, and the picture becomes bleaker. The key to understanding these conflicts is hard to acquire, seeing as there are several moving pieces at play in these conflicts.
For traders, the key to understanding these conflicts is that they can disrupt global trade and the price of oil – as seen both after the Iraq War, and when Iran blocks oil tankers in the Straits of Hormuz.
Politics
The two power hubs in the Middle East are Iran and Saudi Arabia – with Israel a powerful node in the pro-American camp.
American support of Israel is unflinching, but the country’s relationship with Saudi Arabia and especially Iran is a little more strained. For decades, Iran has been a focus of US lawmakers and diplomats, with efforts made to ensure the country never acquires a nuclear weapon, most recently from the Obama administration.
And, according to researchers from TheIranDeal, the most recent efforts to keep Iran playing by the international diplomatic rule book have been in vain. As such, this is an area in which to school yourself if you’re considering investing in businesses in the region – and especially businesses in Iran itself. Ongoing sanctions make Iran a dangerous place to invest at the present time.
Oil
In a sense, much of the conflict and the politics in the region of the Middle East can be traced back to its most valuable commodity: oil.
Many of the gulf states have been built upon this high-value resource, and that’s why there’s always been interest from the Western powers, and from Russia, in getting countries such as Saudi Arabia on-their side.
Nonetheless, the price of oil can fluctuate wildly, as we’ve seen as a result of COVID-19. Any traders interested in investing in oil should watch this region, and its politics and conflicts, in order to make a bet on the price of Brant Crude at any one time in the year or in the future.
Anticipating change in the regimes and politics of the region will help you understand how the price of oil is likely to change in the 2020s, thanks to changes in the Middle Eastern region.
These tips will help you better understand the situation in the Middle East, making it less risky for traders looking to invest.
