A Knee Jerk Reaction to the Foiled Terror Plot in UK

``Nobody likes the idea of Peak Oil. Firstly, you have the politicians. Naturally, a politician will never say that there is such a thing as Peak Oil. It is suicide to give bad news, so a politician will never do that…Secondly you have the media. The media do not like Peak Oil. Why? There is no sponsorship for Peak Oil. The oil companies do not like Peak Oil because you should not say that your soup is cold; you should always say that it is very hot and very tasty, yes? So nobody wants to hear of this phenomenon of Peak Oil.” -ALI SAMSAM BAKHTIARI, retired “senior energy expert,” formerly employed by the National Iranian Oil Co. (NIOC) of Tehran, Iran.

An uncovered terrorist plot in Britain which allegedly intended to hi-jack and bomb or crash several planes into targets in the US, in the scale and magnitude of September 11 recently roiled some markets. Except for Eastern European markets, most of Europe’s equity bellwethers tumbled alongside its currency the Euro, while Crude Oil fell plunged by over $2 on Thursday following the rationale that reduced demand for travels by air would send jet fuel prices lower and take a knock at consumer confidence. As the Euro and Oil took a hit, gold came crashing along with them. See Figure 5.

Figure 5: stockcharts.com: Heavy Loses in Oil and Gold on terror plot

I find this reaction as rather fuzzy reasoning. The world did not stop in the aftermath of September 11. While there may have been reduced interest to take up air travel particularly with relevance to discretionary tickets, it did not stop travel in entirety as travel shifted in other forms. Further, terrorism was definitely not cause of the derailment of consumer confidence as shown in Figure 6.

Figure 6: NASDAQ: Technology Bust not 9/11 is the Culprit

Since the peak of March 2000, the technology bubble bust led the US technology benchmark the Nasdaq to a climatic decline and was at near bottom when September 11 transpired. In fact, barely a month following September 11, the technology-rich bellwether managed to edge higher from its September 11 levels but eventually faltered as the US recession culminated. In short, the consumer confidence in the US had already been battered by the unfolding recession with 9/11 delivering the exclamation point.

Further, based from the initial reports of the botched plot, it would appear that the terror group’s attempt to wreak havoc in the scale of 9/11 encountered a serious breakdown in its operational security; either intelligence efforts by the respective authorities have succeeded in sufficiently penetrating the group’s operations or a would be participant turned cold feet as to snitch on the conspirator’s grand design. This means that the group’s potentials had been severely degraded, and that efforts to regroup and redeploy would take sometime and possibly utilize other areas as staging points for future operations. Therefore, one should expect the carry-on effects to be minimal, if not knee jerk or reactionary, unless of course, other publicly unseen factors working behind the present developments in the financial markets remain camouflaged.