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As Iran escalates, remember that Russia is an oil trade (OGZPY, RSX, LUKOY, BNO)

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People who are being described as "protesters" -- and so are not officially endorsed by the Iranian government -- have stormed the British embassy in Tehran. Expect an official response soon, and keep your oil trades handy. The students originally took six members of the embassy staff hostage, but apparently let them go. An escalation of tension is inevitable. The likely response will be an ultimatum. Military force is as yet a fairly distant prospect, but existing sanctions on Iran will likely become harsher from here. Either way, what will this affect? Brent oil, as embodied by BNO ( quote ). Brent was already on the rise on optimism around the ECB/IMF talks to bail out Italy . Any improvement in Europe will be a negative for the dollar and a positive for commodities, which has become a kneejerk "risk on" response for many speculators out there. The prospect of a supply interruption as Iran feels increasingly trapped can only boost Brent prices higher -- perhaps unpredictably. Iran's major customers are India and China, who may ignore international sanctions or find a way around them, but they only account for 1/3 of Iran's exports. The rest of the world will have to find another source. Russia is an oil trade, full stop. Watch Surguts and Lukoil ( LUKOY , quote ), and with Gazprom ( OGZPY , quote ) releasing details on its dividend policy on Thursday, the entire sector could be in play. Energy accounts for 39% of Russia funds like RSX ( quote ), so as oil goes, so go the big portfolios.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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