Commodities rallied to a six-month high, led by a surge in energy prices, on expectations that the U.S. and its allies are on the threshold of launching a military strike against Syria.
The Standard & Poor’s GSCI Spot Index rose as much as 1.9 percent to 675.44, the highest since Feb. 20, and settled at 668.6 at 4 p.m. in New York. West Texas Intermediate crude-oil futures for October delivery climbed as much as 3 percent to $112.24 a barrel, the highest since May 2011, while Brent crude gained as much as 2.6 percent to $117.34 on concern that supplies may be disrupted.
A U.S.-led strike on Syria is likely within the next week, raising the possibility Brent may reach a record $150 if the conflict affects oil output in Iraq or other nearby producers, according to Societe Generale SA. The U.S., France and the U.K. are laying the legal groundwork to justify action and moving forces into place. Syria is suspected of launching a chemical- weapons attack on its citizens Aug. 21 outside Damascus.
“People are concerned about the geopolitical implications of America launching, however limited, another conflict in the Middle East,” John Stephenson, who helps oversee about C$2.75 billion ($2.6 billion) at First Asset Investment Management Inc. in Toronto, said in a telephone interview. “People believe oil will be eventually disrupted if hostilities become worse.”
Brent and WTI contracts plus gold account for about 50 percent of the GSCI gauge, which is headed for a second monthly advance, the longest rally since a year earlier. This month’s 4.7 percent rally in commodities contrasts with the 2.1 percent drop in the MSCI All-Country World Index of stocks.
Brent may gain “briefly” to $150 if the conflict in Syria spreads to other parts of the Middle East, causing supply cuts, Societe Generale said in the report. Brent traded at $147.50 in July 2008, the highest intraday price on record.
“The market is really focused on the safe-haven aspect,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “There was a bit of risk off the table, with equity markets heading south on the back of escalating words about actions on Syria.”
Defense Secretary Chuck Hagel told the BBC in an interview broadcast yesterday that the U.S. has “assets in place” and forces are “ready to go.” Tomahawk cruise missiles may be launched at night against Syrian targets, said Jeffrey White, a defense fellow at the Washington Institute for Near East Policy and former Defense Intelligence Agency analyst.