Friday, September 9, 2011

Is Oil Sending a Signal? Part II

On August 21 I wrote a post about possible escalation of Israeli-Egyptian confrontation.

There is breaking news (per newswires) out of Cairo that Israeli embassy has been attacked and broken into, and that ambassador is fleeing the country along with his family and embassy staff.

This is another reason why traders have to go flat into the weekend, and why this market can not get any long-term commitment from traders and/or investors. There is now a huge risk unfolding in Middle-East. What a sad story. It is not going away, and I am afraid that it is the beginning of yet another war there. These two nations have been at peace for 30 years.

Market knew this earlier today. At 12 pm I noticed that oil futures started diverging from equities and other commodities and closed flat on the day. I did not think anything much of it, except the fact that there is a hurricane approaching US. Well, now we know the real reason. I now see that some newswires started reporting about protesters trying to tear down the embassy wall as early as 12 pm edt. That was the low of the day for CL. This was too busy of a day for anyone to pay attention to that, as the tensions around the Israeli embassy in Cairo have been escalating almost on daily basis for several weeks. Oil traders paid attention. 

All I can say is watch oil futures and newswires for further hints on where this goes. Somehow I think we will start to price in this new geopolitical risk into the market on Monday.

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