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As war clouds loom over Syria, oil soared to a six-month high and oil traders fretted over more trouble in the Middle East.
Western countries appear to be preparing a military response to Bashar Al Assad’s chemical attack against the opposition, but the defiant Syrian government has chillingly responded that Damascus’ defense will ‘surprise’ the world — sending most financial markets tumbling and bolstering safe havens like gold.
Add Russia, Iran, Israel and Lebanon’s Hezbollah into the mix, and fears of a wider Middle East conflict engulfing more stable Gulf oil exporters have escalated.
Brent ended the day 3% higher, to $114.08 after rising to $114.15 — a six-month high. West Texas Intermediate also hit a five-week high to $109.32, retracing its July 19 price, and its highest level since March 2012.
“Assuming that the Western powers want to protect their dwindling credibility and influence in the region, military reprisals against the Syrian regime appear likely,” said Pierre Fournier, geopolitical analyst at National Bank Financial Inc. in a note to clients, adding that the strikes may have a limited mandate to punish Syria rather than topple the Assad regime.
“While risks are involved, these strikes would not likely, in our opinion, lead to a significant regional escalation of the conflict.”
Others analysts were more worried.
“It’s not the question of if they are going to intervene, but just when and how,” said Julius Walker, global energy markets strategist at UBS Securities LLC in New York. “The issue is whether such intervention will pull in neighbouring countries.”
With the Middle East in a perpetual state of turmoil, Asian customers are increasingly seeking alternative sources to ensure a steady supply of oil and natural gas and that appears to be good news for Canadian producers.
“With all that is going on in the Middle East right now and the concerns in Egypt and the Suez Canal, it will prudent for companies to have a broad geographical portfolio and look at Canada as a strategic resource,” said Brian Pyra, partner at Deloitte Canada.
Indeed, Syria is hardly the Middle East’s only hotspot flashing on the radar screen.
Recent civil unrest in Libya and Iraq has already wiped off thousands of barrels from the global market. A recent failed attempt by terrorists to attack Yemen’s oil facilities also highlight the vulnerability of supplies coming from the Middle East.
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