Investors’ attention is so focused on the escalation of the US-China trade war, many seem to be missing the other escalation that could rock the world: the recent attacks on Saudi oil facilities.

The sabotage attacks on four ships in the Strait of Hormuz last Sunday did get a lot of attention, and oil prices did spike. But it wasn’t clear who was behind the attack or what their purpose was.

Today, we hear that armed drones attacked two oil-pumping stations in Saudi Arabia. Oil is up again on the news, but only 1% or so. That doesn’t seem like much when it now seems clear that the target is Saudi Arabia, source of so much of the world’s vital oil supply.

To be fair, a couple of drones aren’t going to bring the kingdom down. And despite US officials blaming Iran for Sunday’s attacks, the small scale of the attacks does not suggest to me that a major power is behind them. If Iran wanted to send a physical message to Saudi Arabia, it would have been louder and clearer, like blowing something up entirely.

As much as Iran and Saudi Arabia may hate each other, neither benefits if the region goes up in flames. I suspect that Saudi Arabia may be facing an insurrection. Some faction within is trying to hurt the kingdom.

That said, I’ve never claimed to be an expert on military matters or the Middle East. Let that be clear. I’m only guessing in the above, not saying I have some special insight.

But I do know markets. I’ve learned from the best how to spot trends in motion that are worth speculating on. And oil is spiking on this increased tension in the Middle East. So I have to ask: is it time to speculate on higher oil prices?

My take: this is not yet a trend I’m willing to put money on.

To be clear, one could make huge amounts of money buying stocks of oil companies producing or transporting in other parts of the world—or call options on oil itself—if the Middle East goes up in flames. The same would be true even if the entire region isn’t involved, but the Strait of Hormuz is closed, or Saudi Arabia alone becomes a battlefield.

These things are possible—all-out war in the Middle East is always a possibility—but they are not yet a trend in motion. A few ships sabotaged and a couple of drone attacks are acts of terrorism, not war. If there is a trend at all in these small-scale attacks, it’s an issue for anti-terrorist forces to deal with. It’s not likely to make a significant dent in the global oil trade. We’d see more sensational headlines, but the flow of oil would not falter.

And don’t forget that current oil prices are being propped up by voluntary restraint on the part of major producers. It would be easy to compensate for any small-scale disruption. Such an event could even be an excuse for cash-strapped OPEC-Plus producers to abandon restraint and go for market share, causing oil prices to tank.

Now, if it’s proven that Iran is behind these attacks and Saudi Arabia retaliates with force, that would be the beginning of something not easily stopped. Not to discount the human suffering this would produce, it would also make for an investable trend. But that’s not what’s happening. We don’t even know if the small-scale attacks will continue.

In short, there’s not only no trend pointing toward higher prices, it’s entirely possible we could see much lower prices ahead.

To me, if there’s no trend that will lead to predictable results, placing bets is simply gambling, not rational speculation.

Caveat emptor,

Tuesday, May 14, 1:07pm, EDT, 2019