The Debate: As the West considers military action in Syria, will the crisis cause turmoil in global markets?

YES

As long as uncertainty prevails over the crisis in Syria, we can expect to see a loss of appetite for risk assets. Mere speculation that military strikes could occur has seen a sharp uptick in the price of Brent Crude oil and a sell-off in global equity indices. Any actual confirmation of western intervention will hardly invite investors to rush into long trades. From the beginning of the year, the FTSE 100 spiked 16 per cent to its high of 6,870, but we are now witnessing a 50 per cent retracement of that entire move. A significant drop below 6,400 as a result of lukewarm investor sentiment will likely result in increased downside potential. To make matters worse, several other events that could be negative for equities are in the offing – the uncertain outcome of the German elections next month, the volatility in emerging markets, and the threat of this spreading into developed markets. There are too many unknown outcomes to be long in this market. Brenda Kelly is senior market analyst at IG.


No

Markets are understandably worried by the prospect of US-led airstrikes on Syria. Speculation has focused on a wider conflict and disruption to oil supplies. However, the regime’s only significant ally in the region, Iran, has always failed to follow through on threats to block the Strait of Hormuz. Russia and China may oppose intervention, but they are even less likely to do anything about it. Indeed, Israel has already launched airstrikes on Syria three times this year without any fall-out. At around $116, the cost of a barrel of Brent is not that much higher today than the average of $111 since the Arab Spring began in 2011. A further rise to, say, $150, could knock 1 per cent off global growth, turning what is already a lacklustre recovery into something approaching stagnation. Nonetheless, it is still hard to see the circumstances in which oil prices would rise anywhere near this far. Julian Jessop is chief global economist at Capital Economics.