Oil prices, what if Syria turns nasty? Societe Generale research

Societe Generale analyses possible scenarios for oil price, stock markets and European equities on the back of Syrian tensions.

The relationship between the oil price and European equities is complex, but the higher the price rises, the worse the news will be for stock markets, according to Societe Generale research following the worsening of Syria crisis.

Accoridng to the report, which analyses the toll rising geo-political tensions are taking on equities, claimed that oil could reach $150 if the Syrian crisis spills over to Iraq.

SG’s Oil Analyst Michael Wittner stressed that the potential loss of Syrian oil output is not the issue, but rather, it is the potential loss of more than 2 Mb/d from Iraq that raises concern, with the Sunni vs Shiite conflict in Syria having direct parallels in Iraq.

As SG’s research explains, during 1970-2000, the relationship was dominated by episodes of negative correlation. Since then the correlation tends to have been positive. The difference is that during the 1970s and 1980s movements in the oil price impacted the global economy (and stock markets), whereas in recent years both oil and equity markets have been driven by global economic forces, SG explains.

However, the tensions surrounding Syria and the possibility of military intervention by the US and UK are now causing the relationship to turn from positive to negative.

Click here to read full report What if Syria turns nasty?

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