What does uncertainty in the Middle East, Venezuela mean for the markets?
The factors keeping the oil market stable?
U.S. Chamber of Commerce Energy Institute’s Chris Guith on the outlook for oil prices.
It’s been a volatile week for the U.S. stock market.
On Monday, the Dow Jones Industrial Average tumbled 4.8 percent, on track for one of its worst starts to the month since 1970, thanks to renewed trade tensions between the U.S. and China. One day later, the Dow clawed back some of those losses, climbing 207 points on upbeat trade comments.
But while the market has been incredibly reactive to the U.S.-China trade war – and the billions of dollars in tariffs it’s culminated – it’s mostly brushed off other geopolitical tensions, like the Venezuelan crisis and tensions over Iran’s nuclear policy.
“The impact from those countries on us is almost entirely oil related,” Market Hackett, the chief of investment research at Nationwide, told FOX Business. “The impact from Venezuela beyond that has very little implications, the Iranian deal as well. It’s very surprising that the oil markets have handled this as well as they have.”
That’s largely because the U.S. has become such a key driver in oil prices. In the mid-2000s, Hackett said, tensions in Venezuela and Iran — both of which are major oil exporters — it would have been “devastating” to the global economy. The Trump administration, for instance, has sought to stop all nations from buying Iranian oil, approving penalties for companies that continue to be linked to doing so.
“The fact that it has been almost a nonevent just shows how much the economy has matured and how much U.S. production drives the ship,” he said.
Crude oil prices rose more than 1 percent on Tuesday after Saudi Arabia said armed drones struck two oil pumping stations in what it described as a “cowardly” attack of terrorism, according to Reuters. The kingdom said it damaged one pump station, but otherwise did not disrupt oil production or crude exports.
The attack, however, further escalated tensions in the region after Yemen Houthi rebels claimed responsibility for the drone strikes. Yemen Houthi rebels are supported by Iran.