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 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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Theresa May can play big fish with devolved nations - in the EU she's already a nobody

The PM may have more time for domestic meetings in future. 

Theresa May is sitting down with representatives from Scotland, Northern Ireland and Wales on Monday to hear their concerns about Brexit. 

For the devolved nations, it is the first chance since the seismic vote in June to sit down at a table and talk to the Prime Minister together. 

May has reportedly offered them a "direct line" to Brexit secretary David Davis. It must be a nice change for her to be the big fish in the small pond, rather than the small fish in the big pond that everyone's already sick of. 

Because, when it comes to the EU, the roles of Westminster and other nations is reversed. 

Brexit was small potatoes on the menu of Theresa May’s first European Council summit. It may hurt British pride but the other 27 heads of state and government had far more pressing issues on their plate to worry about.

So, it was an awkward debut Council evening meal of lamb and figs for Prime Minister Theresa May and dinner was served with a large reality check.

As May was later asked at her press conference, why would anyone listen to someone who already has one foot out the door?

Britain is in limbo until it triggers article 50, the legal process taking it out of the EU. Until that happens, it will be largely and politiely ignored.

May’s moment to shine didn’t come until 1am. She spoke on Brexit for “five minutes maximum” and said “nothing revolutionary”, EU sources briefed later.

May basically did that break-up talk. The one where someone says they are leaving but “we can still be friends”. The one where you get a divorce but refuse to leave the house. 

It was greeted in the way such moments often are – with stony silence. Brexit won’t be seriously discussed until article 50 is triggered, and then the negotiations will be overseen by the European Commission, not the member states.

As became rapidly clear after the vote to leave and in sharp contrast to the UK government, the EU-27 was coordinated and prepared in its response to Brexit. That unity, as yet, shows no sign of cracking.

German Chancellor Angela Merkel later damned May with faint praise. She hadn’t said anything new but it was nice to hear it in person, she told reporters.

Merkel, as she often does, had a successful summit. She needed Council conclusions on migration that would reassure her skittish voters that the doors to Germany are no longer thrown wide open to migrants. Germany is one of the member states to have temporarily reintroduced border checks in the passport-free Schengen zone

The conclusions said that part of returning to Schengen as normal was “adjusting the temporary border controls to reflect the current needs”.

This code allows Merkel and her Danish allies to claim victory back home, while allowing Slovakia, which holds the rotating Presidency of the EU, enough of an excuse to insist it has not overseen the effective end of Schengen.

But Merkel’s migration worries did not provide hope for the British push for immigration controls with access to the single market. The Chancellor, and EU chiefs, have consistently said single market access is conditional on the free movement of people. So far this is a red line.

Everyone had discussed the EU’s latest responses to the migration crisis at a summit in Bratislava. Everyone apart from May. She was not invited to the post-Brexit meeting of the EU-27.

She tried to set down a marker, telling her counterparts that the UK wouldn’t just rubberstamp everything the EU-27 cooked up.

This was greeted with a polite, friendly silence. The EU-27 will continue to meet without Britain.

Francois Hollande told reporters that if May wanted a hard Brexit, she should expect hard negotiations.

Just the day before Alain Juppe, his likely rival in next year’s presidential election, had called for the UK border to be moved from Calais to Kent.

Hollande had to respond in kind and the Brussels summit gave him the handy platform to do so. But once inside the inner sanctum of the Justus Lipsius building, it was Syria he cared about. He’s enjoyed far more foreign than domestic policy success.

May had called for a “unified European response” to the Russian bombing of Aleppo. It was a break in style from David Cameron, who is not fondly remembered in Brussels for his habit of boasting to the news cameras he was ready to fight all night for Britain and striding purposefully into the European Council. 

Once safely behind closed doors, he would be far more conciliatory, before later claiming another triumph over the Eurocrats at a pumped-up press conference.

May could point to Council conclusions saying that all measures, including sanctions, were on the table if the Russian outrages continue. But her victory over countries such as Italy and Greece was only achieved thanks to support from France and Germany. 

The national success was also somewhat undermined by the news Russian warships were in the Channel, and that the Brexit talks might be in French.

But even warships couldn’t stop the British being upstaged by the Belgian French-speaking region of Wallonia. Its parliament had wielded an effective veto on Ceta, the EU-Canada trade deal.

Everyone had skin in this game. All the leaders, including May, had backed CETA, arguing the removal of almost all custom duties would boost trade the economy. Belgium’s Prime Minister Charles Michel was forced to tell exasperated leaders he could not force one of Belgium’s seven parliaments to back CETA, or stop it wrecking seven years of painstaking work.

As the news broke that Canada’s trade minister Chrystia Freeland had burst into tears as she declared the deal dead, everyone – not the first time during the summit – completely forgot about Britain and its referendum.

Even as the British PM may be enjoying a power trip in her own domestic union of nations, on the international stage, she is increasingly becoming irrelevant. 

James Crisp is the news editor at EurActiv, an online EU news service.