Market jitters over strikes against Syria

The 'ripple effect' of a strike on Syria has weighed on investors' minds.

The Syria crisis has had a mixed impact on markets. Towards the end of last week, Britain's refusal to back an attack on Syria "helped drive global equities higher, as emerging-market currencies enjoyed some respite and demand for haven' assets such as Treasury bonds and gold faded", said Dave Shellock in the Financial Times. The price of oil also eased back.

But as rhetoric picked up in America, markets began to fret again. Indeed, CNN reports that markets are so "sensitive" that the crucial endorsement of a strike by Republican John Boehner caused them to fall "within a matter of minutes".

Of course, much of this turbulence boils down to a lack of knowledge about what is going to happen, rather than the prospect of the strikes themselves. Indeed, as Jamie Chisholm noted in the Financial Times, "some analysts argue the market could react with relief once any US action is completed".

While fear of tension in the Middle East spilling over is one factor unnerving investors, "an attack on Syria [itself] is unlikely to have a negative impact on the world economy or oil flows", said CNN's Cyrus Sanati.

Indeed, it could "take an unstable element out of what has become a nasty civil war". However, as Mohamed El-Erian of bond fund giant Pimco warned CNBC, Syria "has massive network effects", with a long list of countries "connected to the tragedy", including Iran, Iraq and Israel. This potentially disastrous ripple effect' is what the US will want to avoid and what markets are perhaps most concerned about.

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