The list of international strategic hot spots keeps getting longer. There is significant potential for confrontation in North Korea, the South China Sea, the Taiwan Straits, the Gaza Strip, Venezuela, Ukraine and a long list of other unstable locales.

As reported in this article, the newest addition to the list (and one that has been there before) is Iran. The U.S. was in a financial war with Iran in 2012–13, which caused hyperinflation, bank runs and a currency collapse in Iran. Obama eased up on financial sanctions in late 2013 in exchange for Iran’s participation in seven-party talks that resulted in a deal in 2015 to limit Iran’s uranium enrichment and weapons development programs.

Trump tore up the deal in 2017 and reimposed financial and other sanctions. Those sanctions have been increased to the point where they constitute “maximum pressure.” Iran is now in worse shape than in 2013 because they wasted the $10 billion in cash and gold that Obama gave them in 2015 on sponsoring terrorism in Gaza, Lebanon, Syria, Yemen and elsewhere.

The Iranian people know this money was wasted and they now have less patience with their government as the effects of the new Trump sanctions grow worse. Since Iran cannot win a financial war with the U.S., they are resorting to kinetic war by attacking Saudi Arabian vessels and pipelines with drone bombs. The latest reports are that Iran has also mounted cruise missiles on small boats, which constitutes a threat to U.S. Navy aircraft carriers and cruisers in the Persian Gulf.

It’s not clear what happens next, but escalation is likely. Investors should add Iran to their list of places that could erupt into a full-scale shooting war with extensive financial fallout.

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