Investors already bruised by the Japan disaster now confront military air strikes on Libya and the prospect of rising oil prices, making it likely they will postpone any bold investment decisions.
Until a clearer picture emerges, they will want to steer clear of riskier assets as they recalibrate positions.
One thing seems certain: Oil prices will renew their advance posing a new challenge for global recovery. Some analysts said benchmark Brent crude LCOc1 could surge $5 toward the recent two-and-a-half year peak of $119.79, after closing Friday at $113.93 a barrel.
Western forces pounded Libya’s air defenses over the weekend to repel Libyan leader Muammar Gaddafi from rebel strongholds as they enforced a U.N. Resolution. The attacks are set to continue in coming days. Analysts said the strikes create fresh uncertainty.
“It’s an open-ended question because we don’t know whether the air strike on Libya will turn into a quagmire or a quick victory,’ said Boris Schlossberg, a currency strategist at GFT in New York.
Aside from Libya, Bahrain is also in focus, having cracked down on mainly Shi’ite Muslim protesters, a move that has angered Iran and raised tensions in the oil-exporting region.