Saudi Arabia-Iran Proxy War Erupts in Yemen as Bombs Unleas

Saudi Arabia-Iran Proxy War Erupts in Yemen as Bombs Unleashed! MARKET ROUNDUP Dow -40.31 to 17,678.23 S&P 500 -4.90 to 2,056.15 Nasdaq -13.16 to 4,863.36 10-YR Yield +0.087 to 2.007% Gold +$6 to $1,203 Crude Oil +$2.13 to $51.34 Oil Rockets Higher! By Mike Larson Buckle up — because one of the scariest “proxy wars” yet is breaking out in the Middle East! The news: Saudi Arabia launched air strikes overnight in the country of Yemen. It reportedly enlisted the help of Bahrain, Kuwait, Qatar, Jordan, Morocco and the United Arab Emirates. The attacks targeted airfields, bases, and other facilities recently overrun by Houthi rebels. We’re not talking about some limited strike with a few missiles or a plane or two, either. The Saudis apparently used 100 fighter jets, 150,000 soldiers, and even navy units in their attacks or as logistical support, and hit multiple targets throughout the contested western region of Yemen. Countries as diverse as Sudan and Pakistan reportedly may provide additional troops for a ground offensive later.  "Read More"  Saudi airstrikes lift oil prices higher. Post-strike reports cited looting and multiple casualties in the capital of Sana and the port city of Aden to which President Hadi had fled. There were conflicting reports he abandoned the city by boat, but ultimately he showed up at a Saudi airbase in the capital of Riyadh. Later in the day, Egypt announced that it could join Saudi Arabia in a full-scale ground invasion by land and sea. That would open up a whole new chapter in the conflict, and likely become one of the largest regional battles in years. While U.S. planes are reportedly not involved yet, the Obama administration said it was providing intelligence and logistical support. That means we can add Yemen to the long list of countries like Iraq, Libya, and Syria where we’re already providing military or logistical support to various sides fighting regional civil wars. This is deadly serious business for several reasons: First, the Houthi rebels are allied with Shiite-majority Iran. They’ve been seeking to oust Yemeni President Abed Rabbo Mansour Hadi, an ally of Sunni-majority Saudi Arabia. Iran has provided military and financial support to the Houthis in the past, and Iranian officials strongly condemned the Saudi-led action today. If Iran chooses to flex its considerable military muscle in the region to back the Houthis, it risks provoking an all-out war in the Middle East. Other Sunni-allied Gulf monarchies are already blasting Iran, with the UAE’s foreign minister saying “The strategic change in the region benefits Iran and we cannot be silent about the fact that the Houthis carry their banner.” A Houthi leader responded by saying the strikes would ignite a “wide war.” Second, the Houthis, al-Qaeda in the Arabian Peninsula, and ISIS are all battling for control of military assets and territory in the fractured country. The chaos to date has already driven out U.S. personnel and military assets that we were counting on for regional counter-terrorism operations. Now, we have the possibility one or more of these groups will establish new bases of operations in the region. And without a U.S.-allied leader in Yemen, our ability to counter that will be reduced dramatically. That could lead to future terrorist operations against our interests. Third, there’s the impact on the energy markets. Yemen is a marginal oil producer, with just 133,000 barrels per day (BPD) in output in 2013. That made it the world’s 39th-ranked producing nation. But the country borders the Bab el-Mandeb strait, a major oil shipping chokepoint between east Africa and the Arabian Peninsula. Almost 4 million BPD of oil flows from the Persian Gulf into the Red Sea through that waterway. If militants are able to shut the channel down, or threaten tankers sailing through it, it would force companies to ship oil all the way around Africa to get to and from Europe and Asia. That, in turn, would help drive shipping costs up and tighten global supply. “The Middle East is once again in focus, and not in a good way!” We already saw crude oil surge to as high as 52.50 in the early morning hours on the attack news. It pulled back later in the day, but it appears to have carved out a nice double-bottom on the charts. If it can break the top end of the recent range, my work suggests it has a LOT more upside potential. I’m talking about the mid-$60s to low-$70s! Bottom line: The Middle East is once again in focus, and not in a good way! So be sure to pay attention to the latest news, as it will have significant effects on your portfolio. So what do you think about the latest regional chaos? Are the Saudis and their Sunni allies playing a dangerous game here? Or did they have to act in light of the Houthi advance? Is Iran going to get involved, and if so, what will the consequences be? Are you adjusting your portfolio holdings in light of this news, and if so, how? I would strongly encourage you to use the Money and Markets website as a resource in these volatile times. Our Readers Speak Just what was Warren Buffett thinking when he threw his billions behind the Kraft Foods (KRFT, Weiss Ratings: B-) bid? Was it a smart move or not? And what does it signify for the broader market? Reader Steven said: “While the deal might be a ‘Krafty’ move for Warren, all he has purchased are a couple of dinosaurs. Processed is out, whole foods (no, not the store!) are in. I haven’t seen the inside of a Vons in months and do not intend to. I now shop at Sprouts, Trader Joe’s and Clark’s, where I can purchase whole foods without the grocery bill being a whole paycheck.” Reader Jean added: “I think Buffett loses his A@@ on this junk food consolidation, and it would be a good thing, too. Cheap money creates the corporate control in America with politicians in their back pockets. I hope the world will retaliate by going to Whole Foods and home cooking.” Of course, Reader John said there’s a completely different motive behind Buffett’s move. His view: “When I was in grad business school, someone made a comment in one of my classes about Kraft products. He said they don’t have any taste. The professor said ‘Yes, but the sound they make is the sound of money in the bank.’ Buffett’s purchase was not about the ‘taste,’ it was about the ‘sound.'” Is there a lesson for those of us who don’t have billions to invest in massive corporate takeovers? Reader Stktrader thought so, saying the following: “Warren’s 48 billion-dollar acquisition comes when the market is making a TOP. It’s been that way since mergers and acquisitions have been part of the market’s mélange. “On a day that had the S&P being aggressively sold all day long and in size, Buffett’s behemoth takeover is announced. Those are part of the clues that we are entering a long-term bear market that should last at least a year or more.” Well, we’ve certainly seen some pressure on the market the past couple of days. But whether that is a prelude to something much more serious remains to be seen. I believe we are likely to see more of a shift in leadership than an outright collapse, with laggard sectors like energy pulling ahead even as other higher-momentum names take a breather. Other thoughts? Then here’s the link where you can share them! Other Developments of the Day The horrific Germanwings crash saga got even worse today, with news that the co-pilot of Flight 9525 likely flew the plane into the ground deliberately. French prosecutors say that based on cockpit voice recordings from one of the “black boxes,” they believe that 27-year-old Andreas Lubitz locked the airplane’s pilot out of the cockpit. Then he reportedly “activated the descent” that led to the plane crashing into the southern French Alps. There is no word of a possible motive yet, but suicide a legitimate possibility. But the German co-pilot had 630 hours of flight time, and was fully qualified to fly the aircraft. He reportedly ignored all attempts by the pilot to regain access to the cockpit, and there was no sign that he was incapacitated by something like a heart attack or stroke. So criminal intent is strongly suspected. Unbelievable. Initial jobless claims dropped 9,000 to 282,000 in the most recent week. That was below forecast, and it left claims at the lowest level in five weeks. Economists remain leery about first-quarter growth, however, in the wake of recent disappointing durable goods and sales figures. Meanwhile, in Iraq, U.S. planes are bombing targets in and around the city of Tikrit. The move is designed to soften up ISIS defenses so Iraqi forces can drive the terrorist group out of the city. But it makes the convoluted Shiite-Sunni conflicts in the region even more confusing. Consider: We are backing the Sunni-led coalition launching airstrikes against Shiite-affiliated Houthis in Yemen. Yet we’re working with Shiite-majority Iran to push ISIS out of Iraq. Shiite militias may take revenge against Sunnis who live in Tikrit if the offensive is successful, but we’re trying to sweep that under the rug because ousting ISIS is a major strategic goal. Late in the day, a handful of those militia groups said they would stop attacking ISIS in protest of our role in the Saudi airstrikes, illustrating the complexity of the shifting alliances.   If there’s anything you want to add on these very important topics, make sure you go over to the website and let your voice be heard. Until next time, Mike Larson Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.