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Middle East Crisis Poses Threat To World Economy

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http://www.thebusinessonline.com/Stories.a...FFB2&page=2

:ph34r: Middle East crisis poses threat to world economy

By Allister Heath, Fraser Nelson and Joe Lauria

23 July 2006

  

AS Israel intensified its ground operations in Southern Lebanon this weekend, economists gave a chilling warning that a major escalation of the war in the Middle East would send oil prices soaring further and derail an already fragile global economy.

The warnings came as the Bush administration accelerated a delivery of precision-guided bombs to Israel and Iran made renewed threats to retaliate against the Jewish state.

Hezbollah, the Iranian and Syrian backed terrorist organisation which triggered the conflict when it kidnapped Israeli soldiers, continued to fire rockets from fields in southern Lebanon.

Israeli doctors and the army said at least 10 rockets hit towns across northern Israel on Saturday morning, wounding 10 Israeli civilians and damaging two houses.

Israeli troops made incursions into southern Lebanon, engaging Hezbollah militants and taking control of some of its strongholds. It gave new warnings to Lebanese civilians to evacuate their villages by Saturday evening.

The Lebanese town of Maroun al-Ras – for months been used as a Hezbollah stronghold – was seized by the Israeli Defence Force, which also uncovered weapons stashes. The operations were part of what the Israeli military this weekend described as a “limited” ground operation aimed at clearing Hezbollah garrisons of militants.

The UN peacekeeping force in south Lebanon said that around 400 Israel troops were in Lebanon backed by as many as 30 tanks. Lt Gen. Dan Halutz, Israel’s army chief of staff, said in a televised news conference that there will be incursions into the Lebanese territory it evacuated six years ago. “We will fight terror wherever it is because if we do not fight it, it will fight us. If we don’t reach it, it will reach us,” he said.

Fred Dickson, market strategist at DA Davidson, said: “We’re seeing a high degree of investor sensitivity to the situation in the Middle East. Very few clients seem interested in exploring stock bargains . . . and they have not forgotten the market meltdown of 2000 and 2001. Their fear is the Middle East will trigger a similar selling pattern.”

Kingsmill Bond, strategist at Deutsche Bank, said: “The risk lies not so much in the conflict between Israel and Lebanon. It depends on whether it spreads to oil producing countries. As long as the conflict is contained and does not spread to Iran, we would not be too concerned from an equity market perspective.”

The conflict will help send the price of oil to a new record of $78.50 a barrel by the end of the year, up from around $74 at present, a poll this weekend by research house Ideaglobal predicts. This would take oil even above its all-time high of $78.40 a barrel a week ago, reached as the conflict first broke out.

Any further extension of the conflict could also hit the US economy in coming quarters, economists believe. Economists polled by Reuters expect the GDP report to show that the US. economy grew at an annual pace of 3% in the second quarter, down from the first quarter’s growth rate of 5.6%. A similar poll this weekend by Ideaglobal also pencilled in growth of 3%.

Citigroup’s Global Wealth Management team said: “Persistently high oil prices – combined with market uncertainty, both about availability and potential retaliatory moves, especially in Iran – have the clear potential to derail, or at least crimp, the so-far robust and resilient global economic growth.”

Philipp Hildebrand, a Swiss National Bank board member, said: “We are worried. It is a new risk factor. The recent developments in the Middle East are a risk – not for inflation but for the growth outlook.”

In the Middle East itself, the war is already having a huge impact on share prices. The Saudi stock exchange, the Arab world’s largest bourse, continued its steep decline with “current political tensions in the region leaving a negative impact on investors’ sentiments”, the Bakheet Financial Advisors said in its weekly report. These loses are despite the record high crude oil prices.

In Jordan, the Amman Stock Exchange lost 2.72%. But the Israeli attack on Lebanon “has the potential of re-directing investments to Jordan, which seems to reap the benefit of any political turmoil in the region, especially if the conflict were to spread to neighbouring Syria”, said the weekly report of the Atlas Investment Group, the Arab Bank’s investment unit.

  

Kuwait’s KSE all-share price index fell 2.7%, the United Arab Emirates stock exchanges of Dubai and Abu Dhabi lost 2.1% and 1.2%, Qatar’s index declined 4.2% and Egypt’s Hermes index lost 3.8%. However, while the Israeli shekel first fell to 4.56 against the dollar, it has since recovered to 4.46.

Israel has not held the areas it has invaded. The United Nations confirmed that its military withdrew on Friday night from the village of Marwaheen, just inside Lebanon, after confiscating weapons and clearing militants.

Israeli sources denied they plan to reoccupy the area. They said the plan is to allow instead the Lebanese army to move into the land it formerly occupied, and push Hezbollah north of the Litani River – the border of the buffer zone it occupied from 1982 to 2000.

Condoleezza Rice, the US State Secretary, was due to leave on Sunday morning for talks in Israel with Palestinian and Israeli officials before flying to Rome to discuss Lebanon with other officials. She has called for a "robust" military force to remove Hizbollah from southern Lebanon. On Saturday next week, Tony Blair will fly to Washington for talks with President Bush about the Middle East.

Washington has indicated that it will give Israel another week to act without comment or criticism. The US and Britain have made clear they do not support calls for an Israeli ceasefire, acknowledging that Israel must deal with Hezbollah militants.

The Iranian government said that Mahmoud Ahmadinejad, its president, had spoken to Malaysian, Saudi, Quatari and Turkish counterparts about presenting a united Islamic front opposing Israel and the West. "Islamic governments, including regional states, should fulfil their responsibilities in a more concrete way because failure will mean these aggressions will not be limited to Lebanon," he said in a statement.

(see link for rest of article)

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The Iranian government said that Mahmoud Ahmadinejad, its president, had spoken to Malaysian, Saudi, Quatari and Turkish counterparts about presenting a united Islamic front opposing Israel and the West. "Islamic governments, including regional states, should fulfil their responsibilities in a more concrete way because failure will mean these aggressions will not be limited to Lebanon," he said in a statement.

This guy is doing all the right things to get his country nuked.

Anyway, bring it on, its time we had revenge for Madrid, Bali, Sharm el Sheik, London, New York, the list goes on and on.

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Guest Alright Jack

"Middle East Crisis Poses Threat To World Economy"

This is another one of those things that makes much more sense if you reverse it. A bit like "Rising price of x is creating inflationary 'pressures'.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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