Oil

Each of the last five major downturns in global economic activity has been immediately preceded by a major spike in oil prices. Sometimes (eg in the 1970s and in 1990), the surge in oil prices has been due to supply restrictions, triggered by OPEC or by war in the Middle East. Read more

The global financial markets have been remarkably stable this week, considering the dramatic events which have been taking place in the Middle East. Whether this complacency is about to be shattered remains to be seen. After all, there are plenty of reasons for real concern when the world’s largest oil producing region shows signs of mounting political instability, as Nouriel Roubini emphasises in the FT today. But there are also grounds for hoping that the Egyptian crisis might be resolved without causing disruption in the neighbouring Gulf states which contain the vast majority of the region’s oil supplies.

And meanwhile optimism has been boosted by this week’s business survey data, which show that the world economy is in increasingly robust condition as 2011 begins. The markets seem disposed to see the glass as half full for the time being. Read more