How to Play the Darkening Picture in Israel and Iran

It's been nearly a month since The New York Times printed a lengthy, controversial, and sobering Sunday magazine cover story by Israeli military analyst Ronen Bergman concerning the probability of his country attacking a menacing Iran before it is able to complete its push for nuclear weapons. Since the article burst forth, much of the world has intensified waiting, wondering, and worrying.

U.S. officials have only added fuel to the fire by publicly gauging the potential for a unilateral Israeli strike on the Persian regime. For instance, as you may have observed, earlier this month U.S. Defense Secretary Leon Panetta, traveling with reporters to a NATO meeting in Brussels, noted a "strong possibility" that Israel will attack Iran's apparently burgeoning nuclear facilities this spring.

Views from the top
Bergman spent many hours interviewing numerous officials in Israel and elsewhere before ginning out what apparently has become a seminal piece on the options thought to exist within Israel. His most significant contact appears to have been Ehud Barak, Israel's defense minister. It's important to note that, despite a substantial lack of uniformity of opinion within Israel regarding the country's available courses, Barak and Prime Minister Benjamin Netanyahu apparently see pretty much eye to eye on Iran. And while they refuse to show the hands that they hold, they're almost certainly not dovish regarding the possibility of striking Iran's facilities.

Included in Bergman's article are several salient considerations:

  • Iran has been hit by a history of "mishaps and disasters" in its nuclear developments, including transformer explosions, the ruin of 50 centrifuges, tampering with raw materials, and mysterious crashes of airplanes belonging to its military guards. Perhaps most importantly, four key Iranian nuclear scientists have been assassinated -- most recently in January, when Mostafa Ahmadi-Roshan, deputy director of the country's important Natanz uranium-enrichment facility, was dispatched by motorcyclists as he was driving. Iran is eager to pin these disasters on Mossad, Israel's intelligence and covert operations unit.

  • Iran cannot become nuclear-capable without other Middle Eastern nations -- Saudi Arabia, Turkey, and Egypt, for instance -- demanding to follow suit.

  • "For their part," as Bergman notes, "the Israelis suspect that the Obama administration has abandoned any aggressive strategy that would ensure the prevention of a nuclear Iran and is merely playing a game of words to appease them."

  • Perhaps most daunting is an assessment that "[i]t is not for nothing that [Iran] is establishing bases ... in Latin America and is creating links with drug dealers on the U.S.-Mexican border ... Imagine this regime getting nuclear weapons to the U.S. Mexico border ... and into Texas ..." This dark picture comes via a highly placed Israeli official.

  • And finally, Bergman offers his own conclusion: "After speaking with many senior Israeli leaders and chiefs of the military and the intelligence, I have come to believe that Israel will indeed strike Iran in 2012."

Did Iran get there first?
In the face of these foreboding observations, it just might be that Iran has beaten Israel to the punch. As the new week began, the explosion of a car bomb at the Israeli embassy in India injured the wife of a defense ministry official, along with three others. The diplomat's wife is reported to be in critical, but stable, condition following surgery.

Another bomb, this one placed beneath a diplomat's car in Tbilisi, Georgia, was reportedly defused. This followed recent plots to attack Israeli targets in Thailand and Azerbaijan, both of which were also prevented.

Netanyahu blamed Iran for both of the most recent incidents, a contention that Iranian officials termed "sheer lies." United States Secretary of State Hillary Clinton reacted to the attacks by saying that the U.S. "stands ready to assist with any investigations of these cowardly actions."

The places to play
The key question for Fools then becomes which of the optimum energy stocks to add to our portfolios in the face of this gloomy picture. After all, The Motley Fool remains first and foremost a place to come to for meaningful thoughts on the always-changing investment picture.

More and more, it appears vital to keep moving among the energy stocks (which no Fools should be without), while keeping one eye on the broad geopolitical picture and one on any specific stocks that might be profitably traded. For instance, despite its plummeting prices, the world of natural gas continues to be ballyhooed as the fuel of the future. That future may move a lot closer with a conflagration in the Middle East, with its almost-certain disastrous effect on oil prices.

That being the case, I'm inclined to concur with my Foolish colleague Dan Caplinger, and redouble my attention to one of my longtime favorites, Chesapeake Energy (NYS: CHK) , which is active in most U.S. major shale plays. As Dan also has observed, Chesapeake has participated in the funding of Clean Energy Fuels (NAS: CLNE) , which is involved in the creation of natural gas fueling stations, without which this fuel cannot get off the ground, or even down the road, in the transportation arena.

Sandridge Energy (NYS: SD) , an Oklahoma City sibling of Chesapeake that is expanding its presence in North American liquids, continues to appear attractive. Beyond those smaller thoughts, I'm a fan of both Chevron (NYS: CVX) and Royal Dutch Shell (NYS: RDS.B) as solid natural gas plays. Indeed, Chevron, with its big Gorgon and Wheatstone stakes, is the leader of the pack among Australia's rapidly expanding LNG plays. And Shell is nearing the point where its gas production will exceed its crude oil output.

There you have it. There are, of course, numerous other compelling natural gas plays, both in North America and elsewhere. For now, however, I'd at least keep track of the above-named companies, ideally by adding them to your individualized Watchlist. You can do so by merely clicking on the link below:

Add Chesapeake to your Watchlist.

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At the time thisarticle was published Fool contributorDavid Lee Smithdoesn't own shares in any of the companies named in this article.Motley Fool newsletter serviceshave recommended buying shares of Chesapeake Energy and Chevron. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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