No.1 - IRAN RUMOR FUELS OIL SPIKE: The Conflict Trade

Late this afternoon, Nymex crude oil futures spikedover $5 to $68 on rumors that Iran had fired on a U.S. naval ship in the Persian Gulf. The U.S. government quickly and flatly denied the rumor, but the mere speculation sent crude prices to their highest level in over six months (prices since came down $4 to settle just above $64.)

So if a single rumor - debunked by the government - can push oil prices up 5 points, what does that say about the current volatility in the oil pits? And more importantly, what's the trade when tensions are running so high?

Retired U.S. Army Colonel Jack Jacobs, an NBC military analyst, joined the guys on the phone to discuss today's rumor - and why it probably won't be the last.

Jacobs believes Iran is the "most dangerous country on the face of the earth," and rumors of war with Iran will continue for "some time to come." Any time Iran is involved in rumors or speculation of war games, Jacobs says, market volatility will likely follow. This is especially true as Iran is confronting not only the U.S., but the United Nations Security Council as it continues to build up its nuclear program.

Eric Bolling says "Iran means business," and it is capable of affecting every equity market in the world without firing a single shot. His advice for those who have big positions in equities is to put a hedge on it. There is potential to trade substantially higher in oil, he says, and if that happens, equities may get hurt. "The bulls are in control" of oil right now, and to stay safe, he recommends buying the U.S. Oil Fund (USO), a direct ETF tied into the oil market.

Questions? Comments?

Trader disclosure:
On MAR 27, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders:
Strazzini Owns (MO), (T), (VZ), (WMT), Owns Puts in (EEM), is Short Puts in (AUY). Bolling Owns (ICE), (NMX), Natural Gas, Gold, Silver, Soybeans is Short Corn. Macke writes for