Syria, ISIS and Global Markets

December 5, 2015

By: Anton Gladkikh

The ongoing war in Syria has caused strained tensions between Russia and the West, while also sparking a real global crisis, as a result of the growing terrorist organization – ISIS. The real issue underlies between those who support the Syrian president Bashar al-Assad and those who want him removed. Russia has been a long time ally of Syria and a strong supporter of Bashar al-Assad, while also it is the country’s only military base located in the Middle East. Thus, not only is Syria a strategically important place for Russia, the country’s geographic location plays a pivotal role in global power struggle. Fast-forward, Syria is on the brink of financial, economical and cultural collapse, with ISIS taking large portions of control over the country’s resources and oil fields as the Syrian army is unable to withstand its current positions. Being in the heart of the Middle East, Syrian conflict has had an impact on both the oil and gold prices. When Russia began to strike oil fields that are currently held under ISIS’ control, disruption of oil supply, even though marginal on a global scale, resulted in a spike of price of oil, as witnessed on November 14th, when oil surged 3 percent to $43 per barrel. On November 13th, Paris witnessed a terrorist attack that left 120 people dead, which was the worst event that France has witnessed since WWII. As a result, markets, especially those in travel or tourism-related business were hit the most. Major indices including, the NASDAQ Composite and the S&P/TSX plunged to 4909.12 and 13063.12, respectively, with both indices dipping below the 200-day moving average for the first time in the month. Investors were looking to put their money into “safe-haven” investments such as, bonds and gold, and as a result caused gold to spike to $1,095.00 per ounce. On the day of the Paris attack, The CBOE Volatility Index (VIX), which gauges investor fear and market expectation of 30-day volatility surged 14.4 percent, showing that investors do not feel confident in the global markets and expect significant volatility. Hence, while some investors were looking to invest their money into “safe-havens” others were simply on the sidelines. Even though throughout the week, indices, commodities and VIX witnessed a trend in reversal, it is evident how much impact events in Syria have on the global markets and commodity prices.

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