Flashback May 2011: The political chaos in the MENA region has affected the markets gravely especially crude oil which has enhanced to USD 114.82- the highest in three years. The energy markets witnessed extreme volatility during this period as shortage in supply failed to fulfill the increasing demand for the energy products. The global economy has stood up and noticed the supply deficit and consequently increased their appetite for the energy products. As a result, the energy markets especially crude oil increased dramatically.

As the year comes to a closure, the investors are blaming Europe for choking off stock market gains in 2011. However, as the New Year dawns upon us, there is a growing list of geopolitical concerns which could pose a similar risk, if not higher, to the stock and commodity markets. The list is as follows:

• Economic Sanctions on Iran: The western world is moving to put economic sanctions on Iran for its nuclear weapons program. Tensions are rising and analysts are worrying about scenarios where Israel could take action against Iran. On the contrary, Israel could implement measures to reduce the flow of oil through the Straits of Hormuz, a key shipping channel between Oman and Iran. Either way, the measures if implemented could drive the oil prices higher, thereby hurting the global and the financial markets.
• Undisclosed New Kim: Kim Jong-Un, took over the reins after his father died last Saturday. There is not much to write about the 28-year old leader, but the rumors doing the rounds are he now heads the secretive and closed off country with an advanced nuclear weapons programme. This could spark new stand-offs between North Korea and the other nations.
• Internal Strife in Iraq: Just a day after US troops pulled out of Iraq, the country’s Shite dominated government ordered the arrest of Sunni vice president, accusing him of running death squads and assassinating public officials. The fragile government is at risk of dissolving, creating more instability in the Middle East and a certain abruption in the oil supplies.
• Uncertain Russian Election: Prime Minister Vladimir Putin’s coalition lost its majority in parliamentary elections that were criticized for fraud. The question is: Do the Russian citizens want the strong armed leader to return to his position as president in the March 4 election or not? A shift in the center of power in Russia, viewed as unlikely as of now, could have impact on its dealings with the rest of the world, and has implications for energy, as Russia is one of the world’s largest oil producer.

For now, the European and USA’s political and economical imbroglio are affecting the markets gravely. But once the dust settles new avenues for problematic situations could surface. Watch this space for updates.