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Saturday, June 7, 2008

Is $150 Oil Inevitable?

There were two news items that caught my interest in today's (actually Monday's) IBD. First was the unemployment figure, at 5.5%, not that the number was important, but that the market has been expecting rate increases to start later this year (see the recent rally attempt in the dollar), but now that is seriously in doubt. If this causes another leg down in the dolar, there will be a correponding increase in oil, which should take us to $150 easily.

The other story was a "top official" in Isreal who is saying an attack on Iran is now "unavoidable." An attack by the U.S. will have very serious repurcussions (we'll be lucky to get out of it with only $150 oil) but an attack by Isreal will be a disaster of Biblical proportions as all hell will break loose in the Middle East. A blockage of the Straits of Hormuz, even for a few days, will send oil into the stratoshere.

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