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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Jeremy Corbyn's Labour conference speech shows how he's grown

The leader's confident address will have impressed even his fiercest foes. 

It is not just Jeremy Corbyn’s mandate that has been improved by his re-election. The Labour leader’s conference speech was, by some distance, the best he has delivered. He spoke with far greater confidence, clarity and energy than previously. From its self-deprecating opening onwards ("Virgin Trains assure me there are 800 empty seats") we saw a leader improved in almost every respect. 

Even Corbyn’s firecest foes will have found less to take issue with than they may have anticipated. He avoided picking a fight on Trident (unlike last year), delivered his most forceful condemnation of anti-Semitism (“an evil”) and, with the exception of the Iraq war, avoided attacks on New Labour’s record. The video which preceded his arrival, and highlighted achievements from the Blair-Brown years, was another olive branch. But deselection, which Corbyn again refused to denounce, will remain a running sore (MPs alleged that Hillsborough campaigner Sheila Coleman, who introduced Corbyn, is seeking to deselect Louise Ellman and backed the rival TUSC last May).

Corbyn is frequently charged with lacking policies. But his lengthy address contained several new ones: the removal of the cap on council borrowing (allowing an extra 60,000 houses to be built), a ban on arms sales to abusive regimes and an arts pupil premium in every primary school.

On policy, Corbyn frequently resembles Ed Miliband in his more radical moments, unrestrained by Ed Balls and other shadow cabinet members. He promised £500bn of infrastructure investment (spread over a decade with £150bn from the private sector), “a real living wage”, the renationalisation of the railways, rent controls and a ban on zero-hours contracts.

Labour’s greatest divisions are not over policy but rules, strategy and culture. Corbyn’s opponents will charge him with doing far too little to appeal to the unconverted - Conservative voters most of all. But he spoke with greater conviction than before of preparing for a general election (acknowledging that Labour faced an arithmetical “mountain”) and successfully delivered the attack lines he has often shunned.

“Even Theresa May gets it, that people want change,” he said. “That’s why she stood on the steps of Downing Street and talked about the inequalities and burning injustices in today’s Britain. She promised a country: ‘that works not for a privileged few but for every one of us’. But even if she manages to talk the talk, she can’t walk the walk. This isn’t a new government, it’s David Cameron’s government repackaged with progressive slogans but with a new harsh right-wing edge, taking the country backwards and dithering before the historic challenges of Brexit.”

After a second landslide victory, Corbyn is, for now, unassailable. Many MPs, having voted no confidence in him, will never serve on the frontbench. But an increasing number, recognising Corbyn’s immovability, speak once again of seeking to “make it work”. For all the ructions of this summer, Corbyn’s speech will have helped to persuade them that they can.

George Eaton is political editor of the New Statesman.