Positioning investments when America attacks Iran:

A strategy paper by Muffett investments.

As i write this blog, there has been a rumour that the US is positioning to attack Iran along with Israel. This has sent the Oil , gold prices and the DXY higher today ( 18th February 2026). We are going to use game theory to predict potential outcomes and we also discuss how we will position our portfolio which is the main reason for doing this exercise.

Trump and the midterm elections:

Our personal view is that the current attack( if that was to happen) is being forced on Trump. Trump would prefer a peace deal rather than risk a prolonged war with spiking oil prices and a potential loss of face which would mean that he will lose in the midterm elections. He also would prefer a scenario where USA would be permitted to attack specific nuclear sites within Iran to show the war hawks that action is being taken without much retaliation. Both these scenarios would be less risky for Trump and would result in him winning the midterm elections.

However , it looks like the Iranian regime is playing hard ball and does not want to give what Netanyahu wants - which is to give up on nuclear ambitions for good and stop all enrichment. To be honest, the things that Netanyahu wants cannot be achieved in our view and Iran will never accept these terms and so it is likely that Trump will be forced into an action which he does not really want.

It is important to remember the Iran is not like Venezuela. There are several differences between Venezuela situation than Iran. Iran is much more armed and they have always been preparing for a war with America. They have perfected to a reasonable extent drone technology and even supplying Russia with their Drones. They also have hypersonic missiles which they used against Israel during the 12 day war and most likely the reason why the war ended. Also Iran is an important strategic partner and in our view, if USA does attack Iran, then China might be forced to enter the war and support Iran.

American war strategy:

We think that American war strategy would be again shock and awe and their main aim would be to decapitate the regime. That would mean targeting the important people in positions of power including the Khameinei, the Iranian president and heads of IRGC. The hope is that the power vacuum can used to get one of their own to take up the vacuum. This i think would be a failed strategy and does not take into account the ideology of many of the Iranian people. Failure to understand the ideology resulted in several failed wars in Afghanistan.

The other aim would be to destroy the Nuclear sites and also to inactivate as much of the missile systems as possible which will make Iranian retaliation very difficult. Achieving this aim would be very crucial for the success of the mission in our view. If majority of the missile systems in particular the hypersonic missile and drones are destroyed, then the Iranian retaliation would be weak and would achieve temporary victory for America.

Iranian defence strategy:

The Iranian strategy would be Assymetrical warfare. The regime knows that they will be no match to American airpower. They would rather have a peace deal. But the current terms are so demanding that no sovereign nation would accept it. So their strategy would be to create maximum damage by firing supersonic missiles at Israel and the US allies in the middle east. Using drone swarms to close the strait of Hormuz through which 20% of the world’s oil passes causing oil prices to rally to atleast $150. The aim would be also to deny a quick victory to America by prolonging the war as much as possible. The main aim would be to protect the regime head ie Khameini who is the figurative head and the people occupying the top posts in the military establishments. Targetting oil infrastructure of the nations hosting American bases could be another strategy that Iran can use.

The Chinese angle:

Iran has been a strategic partner to China. The current situation is very advantageous to China. The sanctions on Iran means that China can buy oil at steep discount from Iran. It also helps Iran beat the sanctions regime using its own SWIFT system and making their system mainstream. They have also invested heavily in Iranian oil infrastructure which could be at risk if there was a regime change. So China has been helping arm the current iranian regime with their own technology. They will be hoping that the regime is able to withstand the American onslaught long enough for the Americans to withdraw and without getting directly involved in the conflict. Whether the Chinese will directly involve themselves in the war will determine whether the world will go into Third world war or not. If the iranian regime is changed, then the US controls most of the middle east and can maintain a chokehold on China in terms of its energy needs. This will be a strategic blow to China.

The outcome will depend very heavily on how the American strategy of decapitating the regime head and destroying Iranian missile and drone systems and thereby effectively limiting Iran’s ability to respond. So we have to wait until we have more information regarding this (only on a scenario where American goes to war against Iran)

Investment positioning going into the war:

Although we do not know if this war will happen, we can still position ourselves. Immediately after the war starts, we can expect a spike in oil prices. We can also expect a spike in Gold. So at Muffett investments we are already positioned for this scenario. We have EXXON and EQUINOR in our portfolio which we think are strategically positioned to get maximum leverage on rising oil prices and exponential rise in natural gas prices. Kindly have a look at our previous posts on these companies. We have already seen money moving into the energy sector and oil stocks were going up last year even as crude was trading below $60. We think that all portfolios should have energy exposure as a hedge to Equity market falls that will invariably happen at the start of the war. What we do afterwards will depend on how much damage is done to energy infrastructure in the middle east. If the Iranian regime falls quickly then we will look to sell these positions into the oil rally. If however, we have a prolonged war, we will keep them for a little bit longer.

Gold and Gold miners:

We have always been gold bulls and we think that the gold market is in a megatrend. However if we have a war in middle east and gold spikes up very quickly, we will use that to reduce our positions on gold investments. The aim here is to buy the rumour and sell the news. We will reenter after lower levels.

Equity markets and stocks:

If we have a war in the middle east, we can expect the stocks to sell off in the beginning. But we should be buyers of stocks at lower levels. If you look at the Nasdaq weekly chart, the important liquidity resides below November low and August low. We will be buying stocks once price goes below these lows. We also have cash ready to deploy if this scenario were to happen.

Fade the sell off in growth stocks and European real estate and industrial stocks:

Initial anxiety will cause market participants to exit their positions and the stocks with highest beta would be affected. Quality growth stocks would present buying opportunities. We will deploy the cash and the ones gained from exposure to oil and gold to these companies. Europe will be affected more because it is dependent on imports for energy and the piped russian gas is no longer an option. They still rely on LNG from the middle east which can be affected. This will affect the European industrial and European real estate stocks disproportionally and these stocks would present a great buying opportunity.

There are many aspects that we can cover but it is not possible due to the nature of the blog. More on these will follow depending on what happens in the Middle east.