INVESTING: How Middle East turmoil might affect financial markets

Al Qaeda is threatening Iran-saying that if the country does not stop supporting Shiites in Iraq within two months, it will suffer terrorist attacks.

In addition, Al Qaeda has called for a jihad against Shiite Muslims across the world. With the blessing of the U.S. government, the Shiites are in charge of Iraq now. Iraqi Shiites are receiving arms and support from Iran, a nation the United States has long called evil.

We dislike Iran and are at war with Al Qaeda, and the two seem poised to go to war with each other. So what does this muddy picture have to do with investing? Come along, and I’ll show you.

I am not the only person who wonders how America is involved in two wars, one going poorly, and yet our economy and stock market keep pumping along. And don’t tell me it happened during Vietnam, because it didn’t. The stock market topped in 1966, early in our involvement.

No, there could be something else afoot. Perhaps the big money throughout the world is not concerned. That seems to be the message from financial markets all over the globe. Maybe they’re not concerned because they clearly see a trend that is just becoming apparent to us: The major enemies of economic growth are turning against one another, which, over time, will free up the rest of us to keep the growth alive.

There is another, more pessimistic, turn this conflict can take. If Al Qaeda and Iran get after each other, it could pull in other Middle Eastern countries. Saudi Arabia is a predominantly Sunni country, putting it on the side of Al Qaeda.

Iraq could go up in smoke, taking down many of our military personnel in the area with it. The price of oil, however, would go through the roof. In this scenario, $200-abarrel oil is a strong possibility. I have been favoring energy investments for several months. If there is a somewhat benign outcome, global economic growth will keep oil prices moving higher. If the Middle East blows up, energy stocks might be the only thing in your portfolio that heads higher. It is a powerful argument for keeping some money in the sector.

There are a few other assets that will move up if the situation continues to worsen. Smart money will begin to build gold positions, propelling the price of that commodity higher. And, of course, defense stocks like Boeing would get a lift. That stock has been doing well lately, but an Iran-Saudi Arabia military conflict could propel it up another 50 percent in the short term.

Today, all signs still point to higher stock prices over at least the next four to six months. Higher oil prices (which are partly a result of international conflicts) are driving industrial and basic material stocks higher. But so is Asian growth. China is opening a new power plant at least every 30 days. A lot of the equipment and knowledge for those plants is coming from here.

As individuals, we all are welcome to our opinions about what we’d like to have happen in any situation. But as investors, we have to roll with the punches. Even so, we can keep our portfolios working under most market conditions.