Israel has claimed that Iran is behind the latest terror bombing in Bulgaria that killed six Israeli tourists and injured many more. As I have pointed out many times on Fox and in this column, the war between Israel and Iran is ongoing, the question is will it escalate?

I believe we are finally at an inflection point in dealing with Iran. Those who would disagree would argue that there has been trouble in the Middle East since the beginning of time--and they would be right.

However, this time Iran is about to be forced to choose between making a couple of painful choices or to do something stupid, and what they do is anyone’s guess.

Since Iran’s high of 3.8 million barrels of oil per day, it fell to 2.8 million barrels per day, and now with the sanctions, the country is down to 1.6-1.8 million barrels per day. However, it is still producing 2.8 million barrels per day.

The extra one million barrels are being stored in Iran and in its tanker fleet, with estimates that 10 million barrels are being stored on ground in Iran and 40 million barrels are stored using two-thirds of the tanker fleet to do so.

A very simple back-of-the-envelope math calculation will tell you that Iran will run out of storage capacity within weeks, at a million barrels per day of produced oil that they have nowhere to sell.

Once it runs out of storage space, Iran has two obvious choices: shut down the oil wells and face the unwanted problem of well degradation, or comply with inspectors and give in to the international community.

But the country could choose to go another route. Iran could also choose to try and close the Strait of Hormuz.  Any attempt to do this would be unsuccessful and would cause a myriad of international problems. The U.S. buildup in the Gulf is significant right now in anticipation of problems and to make sure the sea lanes stay open.

The country could also launch an attack on the installations of the U.S. and Israel that they have claimed they can easily reach.

The wild card in this is Israel. Israel has said that it will answer the Bulgarian bombing with force, and has acted unilaterally before in taking out the Syrian nuclear capability in Operation Orchard in 2008.

Iran has reportedly repainted, renamed and reclassified ships in an effort to sell oil on the black market, but is not having much success. There are many countries with exemptions that can buy Iranian oil, however, Iran has to ship the oil in its own tankers and insurance on tankers is mostly done in the EU and due to sanctions, the country can’t get anyone to insure the oil

There have been several reported thwarted attacks of Iran origin overseas (at least attributed to Iran). There have also been several high-profile assassinations of nuclear scientists in the country.

In many cases, Israel has been given credit for the mysterious murders, bombings and Internet viruses.

The killings and sabotage have been going on for some time and are escalating, this is why I say the war has already started. The question is: Will it become overt?

I believe Iran is finally at an inflection point due mainly to its inability to store any more oil will crumble its already-weak economy.  Folks in power hate to leave power and bad folks in power really hate to give it up.

Iran is facing crippling sanctions and a bad economy with 20%-plus inflation, double-digit unemployment and subsidies being lifted on the normal citizens which is being met with resistance. All of this leads to a regime change or a regime doing something stupid because it have nothing to lose.

I am not sure if it is even a 50/50 proposition that Iran screws up the Middle East as compared to coming to the table contrite and agreeing to terms. My bet would be against a military conflict, but I think the odds are growing that we could have one. 

However, I believe the worst-case scenario for our economy is a systemic shock in the Middle East and with record low interest rates, the Fed has no way to respond.

Conflict in the Middle East has been brewing for centuries, and I believe we are about to hit another inflection point in the next few weeks to where Iran either backs off (which we all hope) or it will try and stay in power by rolling the dice.