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More Middle East trouble, should we sell our shares due to Iran?

Tristan Harrison
oil company share price

Before the weekend started the world learned that the US had killed Iranian General Qasem Soleimani in Baghdad, does that mean we should sell all our shares because of what may happen next?

I wasn’t aware of who Qasem Soleimani was until this event, but he was apparently one of the most important people in the Iran leadership. That’s why there’s so much speculation about what Iran will do in response. Just today it was announced that Iran won’t abide by its nuclear restrictions.

One of the main concerns for global investors is that something Iran does may be to disrupt oil shipping in the Persian Gulf and thus that would cause oil prices to rise. Iraq isn’t the only country that produces oil, but it’s interesting looking back at recent Middle East history. At the start of 2003 – the year the Iraq war started – the oil price was around US$45 and over the next four years it was fairly close to doubling to around US$78.

So maybe it’s going to be good news for the ASX’s oil companies like Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO) and Oil Search Limited (ASX: OSH)?

But the question is, should we sell our shares because of this? I don’t think the US or Iran want a war. Even if there is a war, I don’t think it’s going to start WWIII. The Iraq war and Afghanistan conflict were going on during a very strong performing period for the share market in the 2010s until the GFC. All of the posturing with North Korea and the threat of missiles didn’t stop the share market a few years ago.

In-fact, the current share market’s value and the long-term average market returns since the early 1900s have been despite the world wars, politicians, policies, diseases and so on. That’s why investing for the long-term in investments like iShares S&P 500 ETF (ASX: IVV) and Vanguard MSCI Index International Shares ETF (ASX: VGS) usually turns out so well.

Foolish takeaway

If someone sells now trying to predict that a war is going to start, when will they buy back? They’re going to try to predict when the war is going to end? It just doesn’t seem like something we should be trying to predict. Even if a war happened, history says that the share market isn’t truly affected by it over the long-term.

The post More Middle East trouble, should we sell our shares due to Iran? appeared first on Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020