Börse & Märkte

Syrian Tensions Continue To Cause Grief In Global Markets

Equities drop again Wednesday, oil shoots up as do safe-haven investments gold and bonds. DAX off 57 points, but Brent and Nymex futures are up over $1.20 each at $115.60 and $110.55 respectively. Gold up over 3 bucks while German bunds are just up 8 ticks. The perceived threat of US military intervention in Syria underpins the negative price action; reports this morning indicate that Western powers [the US, UK and France] are gearing up for a 48-hour cruise missile strike on Syrian military assets at the end of the week.

 

US stocks fell sharply on the back of this on Tuesday, weighing on Asian share markets overnight with a flight out of emerging markets continuing [the Indian rupee falls to record lows, levels unseen for 20 years]. The downbeat tone continues here in Europe and the Middle East [Dubai’s stock market plunged by more than 5%]. We are however coming off a little from opening lows as investors gear up for the session ahead with key US housing data and BOE Governor Carney’s speech on monetary policies.

 

So, despite Tuesday’s better data out of the US and Germany, market participants chose to take cash off the table amid concerns about an impending military action by the Western forces against Syria following last week’s horrific chemical attacks on a rebel enclave in the war-torn Middle Eastern country. The US and its allies are holding the Assad regime [the government of Syria] accountable for the chemical attacks, stating they have evidence to suggest it was orchestrated by Assad.

 

Russia and China however believe the evidence so far is not strong enough and question the legality of any Western intervention, particularly as the US may press ahead with action without seeking approval from the UN Security Council. In financial markets, we are assessing the implications of a possible Western strike against Syria which is now highly probable – that could prompt the involvement of other nations, particularly Iran who have publicly backed the Assad regime. The implications of the involvement of other countries, namely Iran in this case, has led the Israeli military to beef up its defence, saying it would respond with great force to any attack by Syria/Iran.

 

As such, a conflict on this scale [involving Western powers plus Israel versus Iran/Syria and possibly Russia] could easily engulf the whole of the Middle East region which remains in a mess [Egypt in a dire situation with violence flaring up against the care-taker government daily, Libya’s oilfields disrupted by protestors/rebels and sectarian violence in Iraq]. This therefore has the potential to trigge a huge disruption to oil supply which will undoubtedly be felt in Western economies.

 

Once filtered through to the real global economy, the increase in oil prices will put a halt to the current pace of economic momentum we are currently experiencing in major parts of the world. It’s plausible that Brent oil prices could be over $120.00 p/b in the coming days – and, if oil prices spike even higher [above $130 p/b], it wouldn’t be out of the question for the Federal Reserve to hold off on tapering stimulus measures this year.