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U.S. markets, oil prices stable amid Egyptian turmoil -- for now
Whenever there are troubles in the Arab world,[link widoczny dla zalogowanych], the West frets that oil prices will surge and markets will plummet.But as demonstrations in Cairo, Egypt, turned violent on Wednesday and supporters of President Hosni Mubarak clashed with anti-government protestors, no major shockwaves have been felt in the United States yet.
So far,[link widoczny dla zalogowanych], the price of oil has shown no sign of skyrocketing. Crude prices remained essentially flat on Wednesday, rising nine cents to 90.86 U.S. dollars per barrel at the close of trading.While oil is trading at the highest level in three years,[link widoczny dla zalogowanych], prices had been gradually inching up before the Egyptian crisis erupted,[link widoczny dla zalogowanych], and analysts pointed out that Egypt accounts for only a small percentage of world output. If the country's supply is chocked,[link widoczny dla zalogowanych], it is unlikely to shock the system.
At the same time, the Dow Jones Industrial Average on Wednesday surged ahead,[link widoczny dla zalogowanych], closing over 12,[link widoczny dla zalogowanych],000 for the second day in a row.The previous day,[link widoczny dla zalogowanych], the market crossed the 12,[link widoczny dla zalogowanych],000 mark for the first time since 2008 -- on the assumption that Egypt's problems will be settled peacefully,[link widoczny dla zalogowanych], analysts said.
Still, analysts' main fear is that if unrest spreads to neighboring countries,[link widoczny dla zalogowanych], the turmoil could create a ripple effect overseas and impact oil prices and U.S. markets. In the worst case scenario, it could trigger a second recession in the United States,[link widoczny dla zalogowanych], some economists said.Demonstrations in Egypt broke out after similar protests in neighboring Tunisia, and observers are wondering if and how far the protests will spread.
"We really don't know how this will develop. If you have a nightmare scenario,[link widoczny dla zalogowanych], you could have a substantial market downturn," said Douglas Elliott, former investment banker and fellow at the Brookings Institution. "But it could also work out very well. We just don't know."
Francisco Torralba, economist at Ibbotson Associates, a Morningstar Company,[link widoczny dla zalogowanych], said if upheaval spreads to major oil exporters Saudi Arabia,[link widoczny dla zalogowanych], Iraq or Iran, oil prices could surge and negatively impact the U.S. economic activity.
Such a scenario could unravel the U.S. recovery, just as the United States is climbing out of the worst recession since the 1930s, he said.Another potential trap is the possibility of protectionist measures on the Egyptian agricultural exports -- one of protestors' grievances is the rising cost of living, which could spark a rise in food prices. That could sting China, Japan,[link widoczny dla zalogowanych], euro zone nations and others who import certain foodstuffs,[link widoczny dla zalogowanych], he said.
IS "STAGFLATION" ON THE HORIZON?
A growing concern voiced in U.S. media is "stagflation," which occurs when both the inflation rate and unemployment rate are persistently high, leaving a country economically stagnant.It would work like this: instability spreads to other Arab countries, causing oil prices to shoot through the roof, which sparks inflation. At the same time, the markets take a hit,60亿元福州兔年首拍4 christian louboutin pumps sale,[link widoczny dla zalogowanych], the Dow plunges and the jobless rate rises or remains where it is.
Those fears come at a time when jitters over inflation have been building worldwide, and such a scenario could damage the U.S. economic recovery,[link widoczny dla zalogowanych], some economic prognosticators maintain.Indonesia and Turkey are in danger of high inflation, analysts said,[link widoczny dla zalogowanych], and fears are building that some emerging markets could overheat.