Israel-Hezbollah-Hamas Conflicts and the price of oil.
The recent fighting between Israel and Hezbollah, on top of ongoing tension and confrontation in Gaza , has been dominating the news worldwide. The immediate crisis was precipitated by a raid by the militant arm Hezbollah into northern Israel and has led to a continuing series of daily exchanges by Hezbollah rockets, and Israeli artillery and air strikes.
Although, the conflicts may seem a long way from Thailand but the biggest economic concern, at least for the moment, is the price of crude oil. Indeed, on Friday, July 14 th , crude-oil futures closed at $ 77.03 a barrel, the highest point since oil started trading on the New York Mercantile Exchange in 1983. Oil prices are up around 325% since 2001, when crude went for $ 17.45 a barrel. While the price of crude is still well below the inflation-adjusted high of $ 98.58 a barrel reached in 1980, studies by the International Monetary Fund (IMF), and others, confirmed what is intuitive: significantly elevated energy prices, sustained over an extended period of time, will likely shave points off global gross domestic product.In the light of all this, it is important for investors to be able to interpret the pattern of events unfolding in the Middle East through both near-term and long-term implications. Near-term, although the threat of escalation remains present but it is possible that an UN-orchestrated cease-fire could take place within the next several weeks. The only caveat is that Iran and Syria do not join in the conflicts, where there would be a strong likelihood that the US could well be drawn into the fracas. Long-term, it is too early to gauge any consequences on the world's markets and economies but our advice is make sure that your portfolio is well diversified globally and across asset classes, including commodities. Secondly, the time-tested advice is to invest for the long term.
