Tom Yeung here with today’s Smart Money.
If you blinked this week, you may have missed a lot.
After President Donald Trump announced that he would take two weeks before making a decision about Iran, he surprised the world by striking three of Iran’s nuclear sites over the weekend.
On Monday, Iran retaliated by launching 14 missiles at a U.S. military base in Qatar, though there were no injuries.
Later that night, the president announced a ceasefire between Iran and Israel. “It has been fully agreed by and between Israel and Iran that there will be a Complete and Total CEASEFIRE,” he posted on his Truth Social platform.
On Tuesday, both countries accused the other of violating the ceasefire. As of now, it tentatively remains in effect, with President Trump announcing plans to meet with Iranian officials next week.
Interestingly, Wall Street doesn’t seem concerned.
Stocks rallied sharply and crude prices fell to $65, bringing losses since Friday to 13%. Taken at face value, this suggests Wall Street fully believes a ceasefire will hold, and that oil will keep flowing at near-record levels.
In today’s Smart Money, I’d like to consider Wall Street’s reaction… why traders might be far too optimistic in their risk assessment… and what this all means for the oil industry.
Though Wall Street remains fixated on near-term events, it’s still worthwhile to keep an eye out on oil’s horizon.
Then, I’ll introduce you to the artificial intelligence breakthrough that can help you stay ahead of geopolitical curveballs and uncertainties, like this one.
Why Investors Are Betting on Business as Usual
In one sense, investors are right to ignore the news. After all, the most likely outcome is that we return to the status quo.
Consider the past six major military conflicts involving Israel, beginning with the First Intifada in 1987 and ending with Operation Iron Swords in 2023.
On average, the graph below, prepared by JPMorgan Chase & Co. (JPM), finds that these events “did not result in significant supply losses following the conflict, thereby having no lasting impact on oil prices.”
Sunday’s attack with U.S. bunker-busting bombs should have the same negligible impact.
No oil terminals were bombed, Iran seems unlikely to close the Strait of Hormuz (where a significant portion of global oil flows through), and President Trump has long signaled his displeasure with having American troops in foreign wars.
In the most likely scenario, tomorrow will be another Friday, and rising OPEC production (the union of oil-producing nations) will continue pressuring crude oil into the low-$60 range.
Besides, years of buy-the-dip conditioning have turned investors into a rather sanguine bunch.
But what if something happens?
What if we land on that 10% or 20% chance that President Trump is serious about supporting “regime change” in a country with historically unpopular leadership? Or what if an Iranian “proportionate” response to American strikes leads to a wider conflict?
If that happens, Wall Street must reach for an old playbook…
The Risk Wall Street Is Ignoring
Since 1979, the world has seen eight notable regime changes in major oil-producing countries. As JPMorgan notes below, these rare events have typically cut production in that country by 23% over the following six-month period.
This is a risk that investors must take seriously.
The Iranian government (and arguably the Israeli one, too) has no clear plan forward. Iran could continue to abide by the ceasefire, making its already unpopular leaders look weaker, or continue its attack, potentially drawing the U.S. further into the conflict.
Both have the potential for destabilizing the Iranian government and adding the country to JPMorgan’s graph above.
That would send shockwaves through the oil market. Iran is OPEC’s third-largest producer, and even minor disruptions to oil supply has historically sent prices surging.
So, even though we fully expect a return to the status quo in the most likely case, the risks of things going sideways mean it’s still worthwhile to opportunistically add high-quality oil stocks trading at a discount to your portfolio.
Whether tensions escalate or we settle into the status quo, we’re undoubtedly living in an Age of Chaos. There will be more market-flipping headlines to come, and smart investors need tools that can navigate this uncertainty.
And our corporate partner TradeSmith has just the tool in mind…
Your AI Edge in an Age of Chaos
At any moment, one country can make the wrong move, one social media post can ripple through markets, and prices will swing accordingly. The key is to avoid bringing emotions into your decision-making process when investing.
That’s why I want to talk to you about TradeSmithGPT – the biggest breakthrough in TradeSmith’s 20-year history. It’s a new powerful AI tool that can pinpoint a stock’s “profit window” – the ideal timeframe to trade a stock on any given day.
And just yesterday, TradeSmith CEO Keith Kaplan went live in a special presentation to demonstrate the new system. He explained how, with extensive backtesting, TradeSmithGPT crunches more data points – over 120 million – than any human could handle to create real-world models of where prices are headed with a 75% accuracy rate.
And it might just be your key to success in the markets during 2025.
The numbers behind it say it all…
- 4.2 million historical price outcomes across more than 2,400 stocks over seven years.
- 88.9 million daily forecasts that map out price movements over a 21-day period.
- Tens of millions of “validation” runs, which refine accuracy and confidence with each new day of data.
During Keith’s presentation (which you can watch here), he also shares three stock picks from his system with 100%-plus upside potential. You can still catch the replay and see how this AI breakthrough might give you the edge and stability you need, especially in this volatile climate.
But this free broadcast is only available for a limited time.
So, click here to check out what AI-powered investing is all about.
Until next week,
Tom Yeung
Markets Analyst, InvestorPlace
