As the crude price continues to rise on the prospect of military action in Syria, oil companies are inevitably the main gainers in a nervous market.
As Brent added another 1% or so to $115 a barrel, Royal Dutch Shell B shares have climbed 36.5p to 2213.5p, BP is 3.8p better at 450.9p, BG has added 13p to £12.23, while Tullow Oil has risen 21p to £10.39.
Petrofac is the leading riser in the FTSE 100, a day after the oil services group issued an upbeat trading outlook, and is up 30p at £14.03.
But the prospect of higher jet fuel prices has hit British Airways owner International Airlines Group once more, down 9p at 291.5p. Low cost rival easyJet is 33p lower at £12.01.
Miners are mainly lower amid the uncertainty, with Randgold Resources off 140p at £51.95 and Glencore Xstrata down 7.9p at 306.35p.
Overall the FTSE 100 is down 26.79 points at 6414.18, ahead of a speech by recently installed Bank of England governor Mark Carney. The prospect of an attack on Syria seems to be outweighing the recent fears that the US Federal Reserve will call a halt soon to its bond buying programme, one of the market's main supports in recent times. Ishaq Siddiqi, market strategist at ETX Capital, said:
In financial markets, we are assessing the implications of a possible Western strike against Syria which is now highly probable – that could prompt the involvement of other nations, particularly Iran who have publicly backed the Assad regime. The implications of the involvement of other countries, namely Iran in this case, has led the Israeli military to beef up its defence, saying it would respond with great force to any attack by Syria/Iran.
As such, a conflict on this scale [involving Western powers plus Israel versus Iran/Syria and possibly Russia] could easily engulf the whole of the Middle East region which remains in a mess [Egypt in a dire situation with violence flaring up against the care-taker government daily, Libya's oilfields disrupted by protestors/rebels and sectarian violence in Iraq]. This therefore has the potential to trigger a huge disruption to oil supply which will undoubtedly be felt in Western economies.
Once filtered through to the real global economy, the increase in oil prices will put a halt to the current pace of economic momentum we are currently experiencing in major parts of the world. It's plausible that Brent oil prices could be over $120.00 a barrel in the coming days – and, if oil prices spike even higher, it wouldn't be out of the question for the Federal Reserve to hold off on tapering stimulus measures this year.
