Syria has finally seeped into financial markets. It's horrific

Wall Street's "fear gage" up 40 per cent.

Syria. It’s seeped into national politics, public life, and, lately, social media. But this week, as the taboo word “intervention” is used for the first time, Syria has finally seeped into financial markets. And its effect is horrific.

A quick run through the financial headlines and you get the idea: The FTSE 100 is off about 0.5pc at 6,408, the FTSE Asia Pacific index is down 1.6 per cent, the CBOE Vix volatility index (which the FT calls "Wall Street’s fear gauge") is 40 per cent higher than the start of August. The Indian stock market is off 1.1 per cent, 8 per cent since the start of the month, as the rupee continues to fall.  Indonesia’s rupiah is at a fresh four-year low and Turkey’s lira is also suffering. Japan’s Nikkei 225 is down 1.5 per cent and Hong Kong’s Hang Seng down 1.6 per cent.

Underlying these falls is a rush to that old commodity – oil. "Oil volatility" had almost become a by-word to describe financial markets of the 70s and 80s as developed nations thought that blasting water into their sovereign rocks – fracking – would put an end to it. But no, when it comes to the Middle East, oil is key and today its prices are at a two year high. The WTI advanced to $112.24, the highest since May 2011, and Brent oil climbed 0.7 percent to $115.16, after reaching $117.34.

The price of gold has also surged this week – the word "intervention" being, for some, a war cry to seize safe assets.

But while financial markets get hysterical over the possible military intervention in Syria and the effects on oil, consider the scene on the ground. Although Syria’s economy has long been shot, oil never really formed a part of it. Before sanctions stopped the pumps, most of the country’s oil fields were in the East of the country, along the Euphrates, nowhere near the fighting that continues between Damascus and Aleppo and along Lebanese and Turkish borders. Should the Syrian civil war spill well beyond these borders, it shouldn’t matter to the oil market as neither are these countries significant producers.

While major oil pipelines ring Syria, none actually go through the country. Likewise with Syria’s coast, which, when it was deprived of Beirut during the Sykes–Picot Agreement, has never been a maritime trader.

Further still, should neighbouring trade routes, such as the Sumed or Kirkuk-Ceyhan pipelines be put at jeopardy, there is a high chance that Saudi Arabia will lead the charge of OPEC countries to stabilise prises by increasing production – just as they did with Libya two years ago.     

So why now and why oil? Are commodity traders so globally naive as to still believe that "the Middle East=oil"? Or, maybe the word "intervention" triggers an unknowing array of financial algorithms to sell dodgy assets?

But what is happening now in the financial markets is so large that, even if the answer is "yes" to these two questions, there are larger forces at play. After the aforementioned financial chaos, it seems that markets are now predicting what many of us have thought for a while, that this conflict, stirred by intervention, is going to be much larger than simply "Syria".

Markets, to emphasis, are taking on board what William Hague said last week: "What's happening now in the Middle East is the most important event of the 21st Century so far even compared to the financial crises we have been through...it will take years and maybe decades to play out".

Financial markets get hysterical. Photograph: Getty Images

Oliver Williams is an analyst at WealthInsight and writes for VRL Financial News

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Lord Sainsbury pulls funding from Progress and other political causes

The longstanding Labour donor will no longer fund party political causes. 

Centrist Labour MPs face a funding gap for their ideas after the longstanding Labour donor Lord Sainsbury announced he will stop financing party political causes.

Sainsbury, who served as a New Labour minister and also donated to the Liberal Democrats, is instead concentrating on charitable causes. 

Lord Sainsbury funded the centrist organisation Progress, dubbed the “original Blairite pressure group”, which was founded in mid Nineties and provided the intellectual underpinnings of New Labour.

The former supermarket boss is understood to still fund Policy Network, an international thinktank headed by New Labour veteran Peter Mandelson.

He has also funded the Remain campaign group Britain Stronger in Europe. The latter reinvented itself as Open Britain after the Leave vote, and has campaigned for a softer Brexit. Its supporters include former Lib Dem leader Nick Clegg and Labour's Chuka Umunna, and it now relies on grassroots funding.

Sainsbury said he wished to “hand the baton on to a new generation of donors” who supported progressive politics. 

Progress director Richard Angell said: “Progress is extremely grateful to Lord Sainsbury for the funding he has provided for over two decades. We always knew it would not last forever.”

The organisation has raised a third of its funding target from other donors, but is now appealing for financial support from Labour supporters. Its aims include “stopping a hard-left take over” of the Labour party and “renewing the ideas of the centre-left”. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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