Just Two Ships That Pass In the Night
It's really apparent that geo-politics is the main driver in the energy complex when even the Department of Energy's Energy Information Agency warns you not to read too much into their own weekly supply report.
Brent crude surged to the highest level since the all-time highs set in 2008 when Reuters reported Israel Foreign Minister Avigdor Lieberman said that two Iranian warships planned to sail through the Suez Canal en route to Syria on Wednesday, calling the move the latest "provocation" by Tehran and hinting at an Israeli response.
Reuters' reported, "Israel sees a major threat in Iran's nuclear program and calls for its elimination, but the countries' geographical distance has kept them from open confrontation. Syria is one of Israel's neighboring foes and an ally of Tehran. ‘Tonight, two Iranian warships are meant to pass through the Suez Canal to the Mediterranean Sea and reach Syria, something that has not happened in many years,’ Foreign Minister Avigdor Lieberman said in a Jerusalem speech distributed by his office. ‘To my regret, the international community is not showing readiness to deal with the recurring Iranian provocations. The international community must understand that Israel cannot forever ignore these provocations.’"
The Reuters story inflamed the passions of oil bulls who were already closely watching uprisings in Bahrain and Libya. It seems that the entire Middle East is ready to boil over and so is that bubbling crude, especially if you are talking about the Brent variety. Crude calmed a bit after Reuters expanded on the story by reporting that Israel sees no serious military threat but is unsettled and that settled the market down a bit.
Still the fact that the Iranians would have the audacity to send war ships down the canal for the first time since 1979 was enough to increase an already worried market. Of courses Israel should be worried as the fragile stability they have known from their neighbors is being shattered. Egypt's new leadership is in question and a long standing peace treaty between Israel and Egypt may be in doubt.
Bloomberg News reported that Israeli Prime Minister Benjamin Netanyahu says Iran is trying to get Egypt to break its peace treaty with Israel. Now you understand why Israel may feel a bit uneasy with Iranian warships coming so close to their shores. Yet the Iranians may have blinked. Reports of two US warships moving into the Suez may have changed their plans. Still with discontent spreading over the region don't bet that this story is over yet.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at firstname.lastname@example.org.