In late June Iran shot down a United States surveillance drone that was in international air space, although very close to Iran’s border. The United States then prepared to strike Iran, with ships readying missiles and fighter jets approaching the targets. However, at the last moment Trump called back the strike, saying that it would have killed 150 Iranians, which was a disproportionate response for an unmanned drone being shot down.
War was averted at that point, and in the subsequent six months tensions between the United States and Iran have essentially been status quo, although there were more than a few Iranian-backed attacks on Israelis and American personnel throughout the region.
However, the drumbeat of war is intensifying after the United States struck five facilities in Iraq and Syria linked to the Iranian-backed group Kataib Hezbollah a few days ago, in response to an American contractor being killed by the group. Apparently dozens were killed in the strikes.
In response to the strikes, hundreds of protestors who were in support of Kataib Hezbollah stormed the United States embassy in Baghdad. They literally tried to invade the embassy and were planning to burn it to the ground, but apache helicopter gunships dispersed them.
President Trump held Iran responsible for the assault on the embassy, saying “Iran will be held fully responsible for lives lost, or damage incurred, at any of our facilities. They will pay a very BIG PRICE! This is not a Warning, it is a Threat. Happy New Year!”. Iran’s Khamanei responded that the United States is powerless to do anything to Iran, and Iran will destroy anyone who attacks Iran, continuing a war of words that has been ongoing for years.
The United States has responded by sending 4,000 additional troops to the region, who will join the 5,000 troops stationed in Iraq and the 60,000 total troops already stationed in the region.
It remains to be seen if a war will actually break out, since there has been plenty of rhetoric for years, and even serious Iran-backed attacks periodically, yet the United States nor Iran has yet to do something to truly cause a war to breakout despite all of this tension.
That being said, if a war does break out it could quickly spread, especially considering that Iran is allies with both Russia and China, as proven by the first ever joint Iran-China-Russia war games that occurred in the Gulf of Oman this past week. Basically, a war between the United States and Iran has the potential to spread into a war between the East and the West.
Wars are expensive, requiring hundreds of billions and even trillions of dollars, which will require nations involved to print vast sums of money, which can weaken fiat currency. Also, war destroys infrastructure and spreads fear through the economy, which can damage the value of equities.
Therefore, if a war breaks out, whether it is small or global, investors may flock to safe haven assets like cryptocurrency and precious metals. Both cryptocurrency and precious metals stand to gain significant amounts of value if fiat currency is weakened and the economy is disrupted during a war.
Essentially, any major event happening in the Middle East between Iran and the United States could spark a Bitcoin (BTC) rally, so traders should certainly keep tabs on developments in the region.