As Egypt Burns, Investors Rethink Priorities

01/28/2011 1:40 pm EST


Jim Jubak

Founder and Editor,

The news from Egypt and the Middle East is trumping everything else in the financial markets now.

The situation continues to worsen in Egypt, where President Hosni Mubarak has imposed a 6 pm-to-7 am curfew in the cities of Cairo, Suez, and Alexandria in an attempt to suppress a challenge to his 30-year-old regime. (The Associated Press, citing Egyptian state television, is reporting that the headquarters of Mubarak’s ruling National Democratic party is on fire and that the curfew has been extended nationwide.)

The government has shut down Internet and mobile phone service in effort to disrupt communications among the loosely organized opposition and to limit the transmission of video of the protests and police attacks on protesters. The fourth day of protests began shortly after the end of Friday prayers.

Of course, the shares of any company with a business connection to Egypt are being pummeled today. For example, Apache (NYSE: APA), which has onshore oil operations in Egypt, is down 2.7% today as of 12:15 pm ET after falling 4.8% yesterday.

But the fear in the market isn’t limited to Egypt. Remember that the protests now sweeping Egypt earlier brought down the government of Tunisia. Protests have spread to include Yemen. And, of course, the big worry on Wall Street is that they may grow to include the autocratic regimes that control the bulk of oil in the Middle East in Saudi Arabia and the Gulf states.

That’s why oil futures are going wild today. Brent crude was up 1.7% and West Texas Intermediate was up 4.2% as of noon in New York. (Oil stocks are also up—if they don’t do business in some scary place: Oasis Petroleum (NYSE: OAS), which pumps its oil in the United States, is up 3.3% this morning.)

And, as happens in most crises, investors have sought the safety of the US dollar (and the Swiss franc) and precious metals. The dollar is up 0.7% against the euro. Gold has climbed 1.6%, and silver is up 2.9%. (Agnico-Eagle (NYSE: AEM) is up 2.8% and Silver Wheaton (NYSE: SLW) is up 3.4 %.)

With the dollar climbing and investors rushing for safety, commodity stocks and the shares of recent stock market winners are taking a beating this morning. (Well, given the unpredictability of events, who would want to be long over the weekend?) BHP Billiton (NYSE: BHP), for example, is down 2.4%, and Vale (NYSE: VALE) is down 3%.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this post. The fund did own shares of Agnico-Eagle, BHP Billiton, Oasis Petroleum, Silver Wheaton, and Vale as of the end of December. For a full list of the stocks in the fund as of the end of December, see the fund’s portfolio here.

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