Religare MENA Strategy
Comment of the Day

December 02 2011

Commentary by Eoin Treacy

Religare MENA Strategy

Thanks to Emad Mostaque for this edition of his educative report which this month focuses on potential political flashpoints in the Middle East. Here is a section:
Potential flashpoint: Tensions could be inflamed on December 6th (Ashura) with Saudi Arabia meriting particular attention. This could lead to a sharp spike in oil. We are also highly cautious on Iraq, where violence could easily spark a civil war

Syrian endgame: As predicted earlier this year, December looks to be the crunch point for Syria. Elections or power transfer remain the likeliest outcomes.

Bahrain beginning: The arrest of five individuals plotting to blow up various targets in Bahrain last week including the Saudi-Bahraini causeway is a harbinger of potentially more terrorism to come. The Shia majority is nursing its wounds and without proper dialogue will start to lash out.

Iran & bombs: Warnings of an attack on Iran have been circulating for 30 years. It's different this time and we see the probability of an attack rising sharply as we head into 2012 (probability 40% on a 12 month view from 0% last year). The only solution to this mess is dialogue, which has now effectively been taken off the table. We see January/February as the point of peak probability for military action.

Eoin Treacy's view The political situation remains tenuous in a number of Middle Eastern counties and reflects the failure of regional despots to rise to the challenge of managing rapidly growing populations. Young populations require food, water, education, jobs and the chance to aspire to a better standard of living. The political situation is unlikely to stablise until governments, in whatever form, evolve to meet these requirements.

Brent crude oil has posted a progression of lower rally highs since hitting a medium-term peak near $127 in April. The mild downward bias is still evident but a sustained move below $100 would be required to confirm supply dominance.

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