This week, even before reports of the US Special Forces landing in Iraq, stagnant world financial market indices, picking up the scent of the full-scale American offensive to come, showed investors in a wait-and-see mode. A surge in Israeli-Palestinian violence also weighed on stock markets. On the other side of the coin, the price of gold and oil – traditional barometers in times of trouble – could be set to rise.
According to DEBKA-Net-Weekly‘s market sources, the decline of share market support levels towards those seen after the September 11 attacks in New York and Washington is another indication of the anticipatory jitters. Continuing drops in those levels, any rapid deterioration in the Middle East situation, or a major terror strike in the United States or West Europe, could send the markets toward a free-fall. But if the levels stabilize, that will signal investor optimism about the chances of the US war against terrorism being successful.
Since stock markets have a tendency to implode suddenly – a phenomenon that opens up bargain-buying opportunities – several financial experts in London suggested to DEBKA-Net-Weekly that investors should consider selling short, banking on a decline in share prices. The experts see this trend lasting till mid-March. But they advise buying long, cautiously, toward the end of March or the beginning of April, when the City, London’s financial center, believes the US will deliver the full force of its blow against Iraq, possibly lifting share prices up.
The Dow Jones industrial average has been largely marking time in recent days – at around 9,900 points, with a tendency to head south. A decline to the 9,750-point level will be a strong indicator of a downward trend.
The Nasdaq, hovering around 1,750 points, continues to seek lower ground to dig in to. Military events in the Middle East could grease a slide in March and give the Nasdaq a new base line from which to recover and prepare to rise again.
London’s FTSE-100, now at the 5,000 mark, could drop below that level as the US offensive approaches and perhaps fall even further, in a repeat of its post-September 11 tumble.
Gold is likely to shine brightly in turbulent times. After September 11, gold prices rose to just below $300 an ounce. Over the past several weeks, gold prices broke the $300 resistance level and are firmly poised to take off again.
Oil climbed sharply to $30 per barrel after the attacks on the World Trade Center and the Pentagon, but soon slid to $17-$22, thanks mainly the precipitous fall in air travel and the worldwide recession. Current support levels show oil prices could be set to gush again, especially as a result of Saudi Arabia’s coolness on US military initiatives against Iraq. The oil market is also influenced by such factors as Russian president Vladimir Putin’s consent not to cut Russian production at OPEC’s request and Syrian permission for smuggled Iraqi oil to flow to its refineries on the Mediterranean coast. But one thing is certain: oil prices will shoot skyward once the shooting war begins in Iraq.