The market continues to be very volatile thanks to the rising tensions around the globe. The situation in the Ukraine has escalated again, the U.S. started bombing ISIL in Iraq, and the peace talks between Israel and Gaza are breaking down.
Let’s start first with the Russia/Ukraine conflict. Putin appears to want the Ukraine back under his wing. He has already taken a key piece of the Ukraine by annexing Crimea. He has previously grabbed back the state of Georgia. He has shot down a civilian airliner flying over “his” airspace. And he is flying nuclear bombers over our airspace on a regular basis.
The U.S. and Europe are striking back at him by imposing heavy trade sanctions. Russia has to import a lot of U.S. and European goods. But the counter to these actions is the toll it is taking on the European economy. And it has the potential to spill over to our economy as well. Italy is now back in recession and one of Portugal’s major banks needs a bailout.
In retaliation, Putin is placing a one year ban on the import of a long list of food items. Everything from American poultry, to French cheese, and Lithuanian pork is on the list. So the question is, will this situation escalate further or will Putin back down under mounting pressure from NATO countries?
Next we turn to Iraq. The U.S. has been bombing ISIL regularly and succeeded in freeing at least 20,000 Kurds stuck on a Mount Sinjar. I have been warning for several months that this is a very serious situation, and that it will get worse before it gets better.
ISIL is a ruthless ban of Sunni Muslims, hell-bent on bringing their brand of Islam to the entire world. They give you a choice: convert or die. And they have killed many along the way in a most gruesome fashion. Thousands have died in Syria and now Northern Iraq. Should the conflict extend to the Southern oilfields of Iraq it could cause a major disruption in the energy markets.
And let’s not forget Saudi Arabia. They are amassing troops on their northern border as ISIL has threatened to take back the holy city of Mecca which they claim has been polluted. The Iraq/ISIL plot continues to thicken.
And finally, there is no end near for the conflict between Israel and Hamas. The temporary cease fire is barely holding as peace talks are breaking down. It is important to remember the current leader of Hamas, Khaled Mashal, has been the target of several assassination attempts by Israeli special agents but survived them. This makes it personal for him and he is not likely to back down.