Middle East Tensions Impact Oil Prices

Sunday, February 20th, 2011

Crude oil prices increased by 1.3 percent to $87.34 per barrel due to rising tensions in the Middle East. As a result, the Asian stock markets are posting their first decline in the past four days. MSCI Asia Pacific Index was down by 0.1 percent putting an end to their recent 1.6 percent advance. Additionally, futures on the S&P 500 were down by 0.1 percent as well.

The troubling news from the Middle East has been the culprit of this recent downturn. The most concerning development coming out of this region is that for the past six days, anti-government protests have spread across the Libyan nation. According to the Globe and Mail, Seif al-Islam Gaddafi, the son of the de facto leader of Libya, Muammar Gaddafi, has confirmed that the protesters have seized some military bases, tanks, and weapons.

Gaddafi indicated in a nationally televised broadcast on Sunday that if protests continued, there is a real possibility of civil war erupting that could leave the country’s oils wells in flames. The attention this incident has drawn from the international community has resulted in Libya becoming the nexus of the wave of Middle East protests ranging from Yemen, Djibouti, and Bahrain.

Bill Belchere, an economist at Mirae Asset Securities, said that the Libyan protests are a major cause for concern, primarily because Libya is Africa’s biggest holder of crude oil reserves. Conflicts like these can drastically affect the price of oil, and Belchere went on to state that if oil were to go up by $20 or $30, the international community might enter a double-dip recession.

While the instability in the Middle East is concerning, investors are carefully weighing the news regarding the protests in Libya with the optimistic U.S. economic outlook.






Article by Andrew Timm

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com

Tags: crude oil , libya , oil prices , protests

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