The oil and gas industry has spent the past few weeks celebrating Donald Trump's victory in the presidential election and the more energy-friendly policies it's likely to bring. But world events may put a damper on the party. Last weekend, longtime Syrian President Bashar al-Assad was forced out of power by rebel forces, culminating a civil war that lasted more than a decade and creating a new power vacuum in the Middle East. While Syria is not a major oil producer, close allies Russia and Iran are, and that has the markets a little nervous. "I think this is going to put a hit on the ability of both Russia and Iran to sell their oil, which could lead to higher prices around the globe," says Phil Flynn, oil analyst at the Price Futures Group. "Because if you're getting less oil on the black market, that's more supply that has to be made up by legitimate sources."
So far the market reaction to the fall of Syria has been muted, with the price of crude jumping about a dollar on the first day after the news broke. The operative word is one investors generally don't like: uncertainty. "Because of the fall of this dictator who's been in power for years in Syria, there's going to be a lot of uncertainty in the market," says Flynn. "And the question is how are they going to lash out? Is this going to be more risk to supplies, or more risk to transportation?"
The potential outcomes are not all bad, however. Flynn notes that if the new Syrian leadership actually proves more stable than the chaotic Assad regime, there could be new pipelines and infrastructure in Syria that were impossible during the years of civil war. "If those projects are allowed to move forward, that could be another way for Europe to find an alternative to Russian supplies of both oil and gas," he tells KTRH.
The bottom line for the markets is wait-and-see. "The markets have been fairly complacent for awhile now amidst a lot of turmoil in the Middle East," says Flynn. "Let's hope they haven't been too complacent, because if this thing really blows up and we see a disruption of supplies, we could see a price shock."