Tensions in the Middle East have overtaken the eurozone as the main headwind in the global political arena.
While the German election at the end of September has potential consequences if Angela Merkel fails to get re-elected, the expectations are that this is unlikely.
Instead, the possibility that the US and allies will undertake ‘limited’ military action in Syria has the most potential for economic consequences.
But the UK’s parliamentary vote against military action in the country, and with major UN members such as Russia and China opposed to military intervention, Guy Stephens, managing director at Rowan Dartington Signature, notes the inevitability of military action now appears uncertain.
“At the beginning, markets were preparing for action in days, with David Cameron taking the political gamble of recalling parliament. Nobody expected the final outcome when the vote was lost with considerable debate now emerging around the special relationship with the US and David Cameron’s leadership.
“[We have now] seen president Obama announce a similar Congressional referral and a parliamentary recall and the French are now also under pressure to do the same following president Hollande’s voiced support last week. This is perhaps unsurprising bearing in mind the ghosts of Iraq with political leaders always having an eye on the next election and areas of perceived weakness.”
The uncertainty in the region has understandably led to strength in oil, gold and bond prices, even though Syria is a relatively small player in the world’s energy markets.
Andrew Humphries, director of asset management at St James’s Place Wealth Management, points out: “A conflagration of its conflict would have repercussions across the Middle East, potentially disrupting supplies from oil-producing neighbours Iran and Iraq and the wider region, and through the Strait of Hormuz as well as the Suez Canal.”
With discussions on how the UN and global leaders deal with the Syrian conflict ongoing, the shift in focus could mean that economic policy both in the US and eurozone is sidelined at least for the time being.
Nyree Stewart is deputy features editor at Investment Adviser