Forex and Civil War in Syria

Since the beginning of the Arab spring there has been recurrent unrest in the Middle East and across North Africa. Now for currency traders Forex and civil war in Syria have been added to the list of concerns. What started as peaceful demonstrations in Syria were put down with increasingly severe violence over the last year. Add arms shipments from Russia to the Syrian government, support for rebels from various Arab states, and an increasingly hostile and NATO backed Turkey on Syria’s northern border. Now the International Red Cross has termed the widening unrest a Civil War. Those who have watched the situation are not surprised that the unwillingness of the government to negotiate and its use of armed forces against civilians has resulted in this situation. Forex traders were previously watching for a Forex response to a Syrian ceasefire brokered by former UN secretary general Kofi Anan. However, the two sides never really engaged in a ceasefire and civil war is the result. In the wider world bloodshed in the Middle East threatens oil supplies, trade routes, and wider conflict.

Who Is Affected

Considering Forex and civil war in Syria currency markets must take into account the Euro Zone economic contraction , slower economic growth in the USA, and a fall in Chinese exports. Without the risk of wider conflict in the Middle East currency markets already have enough to consider. Because of its proximity Europe is more prone to economic disruption from problems in the Middle East that the USA or China. However, everyone is dependent on oil and the Middle East is a major producer. If the conflict spreads to include Iran and Iran attempts to close the Straits of Hormuz it could bring the USA into the conflict. Then add Iran’s interest in nuclear weapons and the mix becomes lethal. The Swiss franc and Japanese Yen stable, safe haven, currencies and both countries are physically removed from the area of possible conflict. However, Japan is hugely dependent on foreign oil imports, especially since ramping down nuclear energy production after the tsunami. In the end every nation on earth and every currency would be affected by wider conflict in the Middle East. Thus we have the concern regarding Forex and Civil War in Syria.

Can It Get Worse?

There appears to be no way out for Syria’s president and his close supporters except exile, continued conflict, or defeat. Assad has gradually lost his supporters except for Iran, Russia, and China. Although Russia and China can support Syria they will likely not get involved in putting troops on the ground to defend a dying regime. On the other hand Iran which lives in the same neighborhood although it separated from Syria by Iraq. The question for currency traders is what will be the relationship of Forex and civil war in Syria if things get worse, settle down, or continue at the current level? What will be the best currency pair to trade in order to profit from any given scenario? Economies distant from the crisis and not especially dependent on oil from the Middle East may do the best. In this case Brazil and China come to mind. Both have oil supplies and neither is in the neighborhood. Russia fits as well as the world’s largest oil producer. Although Russia and China support Syria it seems to be a matter of real politik and not a heartfelt support. Russia likes having a port of call in the Mediterranean and Syria fits the bill. However, the business that Brazil, Russia, and China do with the rest of the world will suffer in the event of a global economic downturn if things get worse with Forex and civil war in Syria.