Economists believe that investors are increasingly afraid that the next market crisis will emerge from the Middle East. Like last year's fears that the debt crisis in Europe would have a domino effect across the continent, the uprising in Egypt raises fears among investors that markets are at risk as the crisis spreads to other countries. The fear is grounded in geopolitical risk and has been a key obstacle to markets in the past few days.
"CNBC" says that the uprising in Tunisia and Lebanon had little effect on the markets, but the escalation in Egypt caused global markets to tumble as investors sold off shares and sought safe investments, such as gold and US government bonds.
Genworth Financial Management chief market strategist Christian Hviid told "CNBC", "What the markets are fearful of is further spillover into other authoritarian nations. Syria, Saudi Arabia and Yemen ought to be very concerned about this considering their government structure and potential for similar flare-ups."
While Egypt itself is not a major oil producer, its primary export is cotton, also an important good, and the Suez Canal is used to transport much of the world's petroleum and other materials. In addition, President Hosni Mubarak, whom protesters want to see ousted, has long been a US ally. Hviid added, "There is the importance of Egypt in it being a very close ally to the Western world and an anchor of stability for the region. The importance of Egypt has to do with the Suez Canal. That's the major link between Europe and Asia trade flows. It's real critical that the canal remains open, that the tension doesn't escalate to the point where trade may be impaired."
Published by Globes [online], Israel business news - www.globes-online.com - on January 30, 2011
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