Eqypt and oil price

The crisis in egypt is making oil shooting through the roof. The vents in Egypt will not only decide the fate of the nation but also the middle east which is the main supplier of the oil

WSJ 's take

The turmoil in Egypt is reverberating around the world, battering stock markets, driving up oil prices and raising questions about whether the rising cost of crude could slow the global economy.

The Egyptian stock market is expected to be closed Monday, after shares fell 17% late last week. Most Persian Gulf markets fell Sunday, with Dubai tumbling 4.3% and Oman 3%. The Saudi Arabian stock market ended up 2.5% after sliding 6% on Saturday. Prices for U.S. benchmark crude futures leapt $3.70, or more than 4%, to $89.34 a barrel on Friday. In Asian trading early Monday, U.S. oil futures were trading up 87 cents, or 1%, at $90.21 a barrel.

J.P. Morgan economists estimate that a 10% increase in oil prices, if sustained, would slow global GDP growth by a quarter-percentage point. They expect global output to rise at a 3.6% annual rate this quarter.

"The principal concern is that civil unrest spreads to Middle Eastern and North African oil producers, producing significant reverberations in financial asset prices and confidence," J.P. Morgan said in a research note.

For the U.S., the surge in oil prices comes just as the economy appears to be growing at a pace, which, if sustained, could bring down unemployment in the months ahead. Several European economies are growing more slowly or even contracting due to the continuing effects of the financial crisis.

About a million barrels a day of crude and refined products are shipped northward on the Suez Canal, according to the U.S. Department of Energy. A separate pipeline across Egypt carries 1.1 million barrels a day between the Red Sea and the Mediterranean. Together, that is roughly 2% of global oil production.

Closing the Suez Canal would force ships to seek other routes, adding about 10 days to the time it takes for Mideast oil to reach the U.S. and 18 days for the trip to Northern Europe. That alone would push up crude prices even if supplies were adequate due to emergency reserves around the world.

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