Former Defense Secretary Donald Rumsfeld's famous speech on "known knowns" and "unknown unknowns" may have never been truer than today, at least as far as the markets are concerned. It appears we are lurching from one geopolitical crisis to another without the foggiest idea of what may come next, or more importantly, what we don't know about what may come next.
"As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know."
Financial markets around the world have been preoccupied with both economic and monetary policy uncertainties. But in the last few days, it has become apparent that the real risks of an unexpected market event can be found in military theaters around the world.
Russian fighters have buzzed U.S. warships as each stakes out strategic positions in Syria. Russian submarines have been trolling the Atlantic, worrying some observers that a move to disable undersea communications cables is a real and growing possibility.
All this comes as Washington is sending a team of 50 "advisers" to Syria to begin taking on ISIS more directly, while attempting to train and equip Syrian rebels opposed to the regime of Bashar al-Assad. The risk of "mission creep" in Syria is becoming very real. Military experts, speaking on weekend television, suggested the U.S. could not defeat ISIS in the Levant without ramping up its troop commitments to anywhere from 10,000 to 100,000 American boots on the ground. That would represent the third U.S. war in the region in the last 15 years.
Russia, for its part, says it is attacking ISIS, while it is actually bombing the rebels seeking Assad's ouster. The crash of a Russian jet in Egypt has raised questions about the safety of air traffic above the skies of these embattled regions.
The growing proximity of U.S. and Russian personnel is most worrying, given that those forces have not been this close to squaring off since the war in Afghanistan in the late 1970s, when the Cold War was still raging.
A proxy war in Syria between the world's two largest superpowers may be already underway. And while a shooting war remains unlikely, the risk of a face-off between the two sides, accidental, or intentional, just escalated in the last 48 hours.
To be sure, this is not quite a Cuban missile crisis scenario which, in 1962, almost triggered a nuclear exchange between the U.S. and U.S.S.R. But, the risk of a cyber war or another direct confrontation between Washington and Moscow is the type of event that plays into Russian President Vladimir Putin's hands. He is fast running out of foreign exchange reserves; they could fall to zero by next year. He is also going broke as oil prices plummet, pushing the Russian economy deeper into recession. All this could be a ploy to drive oil prices, and Russian revenues, back up irrespective of the geopolitical consequences.
And, it's not the only global hot spot in play. U.S. warships are now powering through the South China Sea, testing China's willingness to allow unfettered passage for any ships sailing in recognized shipping lanes around the world.
Chinese escorts followed U.S. ships and warned them to leave the area, 12 miles off the man-made islands that China now claims as sovereign territory. China described U.S. actions as "provocative." A veteran Chinese general proclaimed that China is not afraid of war with the United States, raising fears that the U.S. is not only squaring off with the world's second largest military superpower, Russia, but also with the No. 3 player in the world as well.
This is how accidents happen. Not to mention the fact that the U.S., already stretched thin by two wars yet to be fully wound down, is adding additional fronts to defend.
This is not a critique of U.S. military policy. My bigger concern is that no one, especially the markets, are prepared for an escalation of either conflict that could lead to a more direct confrontation among the world's biggest armies.
Defense stocks may be a good hedge against this rising risk. Gold, the U.S. dollar and Treasury bonds may act as safe havens if, indeed, there are more direct interactions between, and among, the various factions vying for advantage.
While it's usually a fool's errand to make bold geopolitical predictions, it is not foolhardy to protect one's portfolio from the "known knowns" and the "unknown unknowns," of which there are an increasingly large number making their presence known, or felt, in just the last few weeks.
Commentary by Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street. Follow him on Twitter @rinsana.