Answer: The reduction in the global economy’s energy-intensity and lower dependence on the Gulf states is a positive for investors.
Like old generals, investors and journalists are good at fighting the last war. The initial market and media response to rising tensions in the Gulf last week was, therefore, entirely predictable: oil and gold up, shares down, leading to a rash of stories about last year’s bull market hitting the buffers.
At any point in the past 50 years, that reaction would have made sense. For as long as I can remember, instability in the Middle East has been bad news for investors in the rest of the world. More expensive energy as the oil trade is disrupted, higher inflation, recession, falling share prices.
This time around, however, the knee-jerk reaction was almost immediately reversed. The oil price rose 5pc in the aftermath of the assassination of Iran’s totemic general, Qassem Soleimani, in Baghdad. Within three days it was back where it started. The S&P500 index continued to hit new all-time highs. Crisis, what crisis?
This pattern, where the market’s muscle memory temporarily kicks in before a more sober assessment takes over, is becoming the new normal.