The Syrian Question and World Forex Markets

The world seems to have grown tired of intervening in the Middle East as the slaughter of civilians in Syria (some 8,000 dead since the start of unrest about a year ago) continues, and little if anything seems to be happening to prevent it. But is the situation in Syria different or similar than the situation in Libya under Qaddafi? And what does this mean for the Forex markets, if it means anything at all? These are things that any Forex trader should consider, even if he's only trading popular currency pairs.

Syria vs. Libya

The first thing to realize is that unlike Libya, where Qadaffi had been trying to find a way to work with the West and had been gaining a modicum of respect, Syria was already largely isolated from the world. President Bush had labeled them as an extension of the so called "?Axis of Evil" (while the Axis of Evil formally included Iran, Iraq and North Korea, Syria has always been seen as something of a client of the Iranian regime) and they had minimal ties with the West to begin.

Another thing to keep in mind regarding Syria is the country lacks much of the oil wealth which Iran and Libya have enjoyed, producing just 0.5% of the world's crude, thus making them less important on the world stage. All of this means that it's not as crucial for the West to intervene in Syria as it was to intervene in Libya and now in Iran.

It may sound callous, but the fact is that as John Foster Dulles famously put it, ‘countries don't have friends.' They have interests. And when the interests of the West aren't directly tied to Syria, there is more of the moral hand wringing and less of the direct intervention we saw when NATO forced the Qaddafi government to get out of Libya.

What This Means for Forex Markets

Now, while this all may mean that for now, there isn't much of an impetus for NATO to get directly involved, it doesn't mean that the aggression in Syria won't affect the world markets. The unrest there is worrisome mostly because of the fear that it could spread to neighboring regimes where there are more Western interests. Thus, expect to see some movement on Forex markets if the fighting does begin to spill over into other Middle Eastern nations.

Saudi Arabia, though they don't share a border with Syria is also a place which could see flare ups, especially if the Syrian people succeed in ousting their dictator. This might well move Saudis, who are also ruled by a minority, to rejoin the Arab Spring and work to overthrow their leaders. For now though, the long, drawn out and bloody battles in Libya and Syria seem to be have put the kibosh on these dreams, thus helping to lower the effects on the Forex markets.

Investment

The other area of concern is international investment and I think this is again not being affected so much by the Syrian regime as it is by the Iranians and their threats to close the Strait of Hormuz. If world oil prices have been climbing, it's not because there is much concern about the 0.5% of world crude flowing from Syria.

Bottom Line

I don't see Syria making much difference on the world stage as far as investing and Forex markets for the foreseeable future. On the other hand, if the regime decides to try a desperate gambit to stay in power, such as attacking Israel, this could lead to a regional flare up which could, in turn, lead to a dangerous spike in world Forex markets and put investments in the region in danger.

What do you think?

DailyForex.com Team
The DailyForex.com team is comprised of analysts and researchers from around the world who watch the market throughout the day to provide you with unique perspectives and helpful analysis that can help improve your Forex trading.