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Title: Saudi Arabia-Iran Proxy War Erupts in Yemen as Bombs Unleashed!
Source: [None]
URL Source: http://www.moneyandmarkets.com/
Published: Mar 26, 2015
Author: Mike Larson
Post Date: 2015-03-26 17:23:56 by BTP Holdings
Keywords: None
Views: 7

Saudi Arabia-Iran Proxy War Erupts in Yemen as Bombs Unleashed!

By Mike Larson

Buckle up — because one of the scariest “proxy wars” yet is breaking out in the Middle East!

The news: Saudi Arabia launched air strikes overnight in the country of Yemen. It reportedly enlisted the help of Bahrain, Kuwait, Qatar, Jordan, Morocco and the United Arab Emirates.

The attacks targeted airfields, bases, and other facilities recently overrun by Houthi rebels. We’re not talking about some limited strike with a few missiles or a plane or two, either.

The Saudis apparently used 100 fighter jets, 150,000 soldiers, and even navy units in their attacks or as logistical support, and hit multiple targets throughout the contested western region of Yemen. Countries as diverse as Sudan and Pakistan reportedly may provide additional troops for a ground offensive later.

Saudi airstrikes lift oil prices higher.

Post-strike reports cited looting and multiple casualties in the capital of Sana and the port city of Aden to which President Hadi had fled. There were conflicting reports he abandoned the city by boat, but ultimately he showed up at a Saudi airbase in the capital of Riyadh.

Later in the day, Egypt announced that it could join Saudi Arabia in a full-scale ground invasion by land and sea. That would open up a whole new chapter in the conflict, and likely become one of the largest regional battles in years.

While U.S. planes are reportedly not involved yet, the Obama administration said it was providing intelligence and logistical support. That means we can add Yemen to the long list of countries like Iraq, Libya, and Syria where we’re already providing military or logistical support to various sides fighting regional civil wars.

This is deadly serious business for several reasons:

First, the Houthi rebels are allied with Shiite-majority Iran. They’ve been seeking to oust Yemeni President Abed Rabbo Mansour Hadi, an ally of Sunni-majority Saudi Arabia. Iran has provided military and financial support to the Houthis in the past, and Iranian officials strongly condemned the Saudi-led action today.

If Iran chooses to flex its considerable military muscle in the region to back the Houthis, it risks provoking an all-out war in the Middle East. Other Sunni-allied Gulf monarchies are already blasting Iran, with the UAE’s foreign minister saying “The strategic change in the region benefits Iran and we cannot be silent about the fact that the Houthis carry their banner.” A Houthi leader responded by saying the strikes would ignite a “wide war.”

Second, the Houthis, al-Qaeda in the Arabian Peninsula, and ISIS are all battling for control of military assets and territory in the fractured country. The chaos to date has already driven out U.S. personnel and military assets that we were counting on for regional counter-terrorism operations.

Now, we have the possibility one or more of these groups will establish new bases of operations in the region. And without a U.S.-allied leader in Yemen, our ability to counter that will be reduced dramatically. That could lead to future terrorist operations against our interests.

Third, there’s the impact on the energy markets. Yemen is a marginal oil producer, with just 133,000 barrels per day (BPD) in output in 2013. That made it the world’s 39th-ranked producing nation.

But the country borders the Bab el-Mandeb strait, a major oil shipping chokepoint between east Africa and the Arabian Peninsula. Almost 4 million BPD of oil flows from the Persian Gulf into the Red Sea through that waterway.

If militants are able to shut the channel down, or threaten tankers sailing through it, it would force companies to ship oil all the way around Africa to get to and from Europe and Asia. That, in turn, would help drive shipping costs up and tighten global supply.

“The Middle East is once again in focus, and not in a good way!”

We already saw crude oil surge to as high as 52.50 in the early morning hours on the attack news. It pulled back later in the day, but it appears to have carved out a nice double-bottom on the charts. If it can break the top end of the recent range, my work suggests it has a LOT more upside potential. I’m talking about the mid-$60s to low-$70s!

Bottom line: The Middle East is once again in focus, and not in a good way! So be sure to pay attention to the latest news, as it will have significant effects on your portfolio.

So what do you think about the latest regional chaos? Are the Saudis and their Sunni allies playing a dangerous game here? Or did they have to act in light of the Houthi advance?

Is Iran going to get involved, and if so, what will the consequences be? Are you adjusting your portfolio holdings in light of this news, and if so, how? I would strongly encourage you to use the Money and Markets website as a resource in these volatile times.

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