Oil prices spiked this week as a new wave of violence swept across Iraq, led by an extremist group known as Islamic State of Iraq and Syria (ISIS). The news briefly rattled stocks late in the week after months of what some market-watchers called a “boring” market. It’s boring no longer.
President Obama spoke Friday about the increase in violence in Iraq. He cautioned that no American ground troops would be deployed to Iraq, but said he will review “a range of other options” in the days ahead.
Crude oil prices (CLN14.NYM) rose about 3% for the week in response to the developments in the Middle East.
“The thing is, [ISIS] has not actually threatened any areas that have oil facilities,” said Yahoo Finance Columnist Rick Newman. “If we were to see them threaten any place in Southern Iraq, for instance, where most of the oil facilities are, we’d see a huge jump in prices.”
Newman and Yahoo Finance Editor-in-Chief Aaron Task agree that any rise in oil prices will hit Americans at the gas pump.
Stock prices recovered Friday, ending in positive territory after selling off midweek following initial reports out of Iraq. Host of Breakout, Jeff Macke, said the biggest take-away for the week is “the resiliency of the market in the face of the first real, good excuse to sell. Whether they’re threatening oil supplies or not – this ISIS group is scary with a big, huge ‘S’ and the market had an excuse to sell in there and didn’t do it.”
That bodes well for the market overall, but there was good news for individual names too. Intel (INTC) soared to a new 10-year high after the company raised its revenue guidance for the first time in 5 years on stronger-than-expected demand for computers.
In other corporate news, Amazon’s (AMZN) much-anticipated mystery phone that may or may not have 3-D capability is expected to be unveiled at a press event on June 18 in Seattle.
But the biggest thing to watch in the week ahead will be Iraq, the impact on oil prices and the overall market reaction to the latest developments. Newman says this is only the beginning and there are likely to be some strange developments in this story. "The market bears keep saying, 'but what is the catalyst going to be for a selloff?' Maybe it's not going to be one catalyst," says Newman. "Maybe it's going to be a group of things" all coming together, including oil.