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The price of oil is up. Major stock indices are down. Egypt is in crisis mode again. Make that “Egypt is still in crisis mode.” With the satellite news feed from Cairo, millions of people around the world are witnessing millions of Egyptians protesting against what looks like is going to be a short-lived Morsi regime.
Egypt? Are you kidding me? Egypt isn’t considered a major country, either politically or economically. Speaking of economically, the country has been in an economic shambles since Morsi took over on 30 June 2012. It has not had more than 90 days of cash reserves for the past year, and has been closer to 60 days for a major portion of that time.
Morsi came into power on the wings of the Muslim Brotherhood and has made vociferous public declarations that his objective whilst in power is to establish a one-world Islamic caliphate by unifying the Middle Eastern Arab states and destroying Israel. He and the Brotherhood gained control following the ouster of long-time president Hosni Mubarak on the premise of the so-called Arab Spring’s quest for democracy. Morsi’s government is far from being a democracy. The only thing that has resembled a democracy in Egypt is the election by which Morsi came into power, but even the democratic element of that election is dubious when one understands that, although 90% of the population is Muslim, the Muslim Brotherhood comprises a relative small portion. By the way, did I mention that the Muslim Brotherhood is considered a terrorist organization by Russia and that it’s subsidiary, Hamas, is likewise considered by the U.S., Canada, and the EU? That is what would make me nervous. For investors it’s something entirely different.
Egypt controls the Suez Canal.
That is what has investors in anything nervous, and is driving the price of oil up over $100 a barrel. The fear is that the current crisis could lead to the closure of the main waterway shipping routes from the Red Sea to the Mediterranean. One of the biggest commodities coming through the canal is oil. Closure of the canal would wreak havoc on logistics and shipping costs. Access to goods and the Arab oil supply could, potentially become very limited. Speculation over the effect of the law of supply and demand seems to be the major driving force today for the rise in oil prices and the decline of world stock indices. All the speculation and all of the uncertainty and anxiety is tied, at least in part, to a 193 km stretch of water that flows through what is, for the moment at least, one of the most unstable countries in the entire world, exluding Syria, North Korea, Yemen and several others.
My personal guess is that, as the deadline approaches in just a few hours, the Egyptian Army will oust Morsi. What happens after that remains to be seen. But the military does have a plan for establishing a stable government. Whether it ultimately turns out for the best or the worst is the million-dollar question. It will be interesting to see how the markets and commodities respond over the coming days as the news in Egypt unfolds.
