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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How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

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