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Syria clash hits the markets

The financial markets switched into a clear risk-off mode as the Middle-East tensions have recaptured all the headlines. The growing likelihood of a military action of the West in Syria is pressuring the emerging currencies and the stock markets, supporting the “safe” assets.

The United States are now accusing the Syrian government’s regime of usage of the chemical weapons in an attack on a rebel-held suburb in a Damascus. This situation is involving the West in a new armed Middle East conflict and bringing it into direct confrontation with Russia, which continues to support the Assad administration. 

Syria itself is not a significant oil producer, but there are fears for the stability of all the Middle East, which produces about a third of the world's oil. “The geopolitical tension in Syria escalated one significant notch higher”, BNP Paribas analysts say. “It’s the implication of what a broader conflict in Syria would mean to key suppliers in that region. The market has simply positioned itself long on oil and other safe-haven assets and is waiting for the next turn of events.”

As a result, the US dollar is gaining strength versus all major peers, except for the safe yen and Swiss franc. WTI crude oil rose to the highest level in 18 months ($110.64 as of writing). Gold reached the highest levels since early June, trading at $1425 as of writing. 

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