The UK government has put out a paper explaining why a strike on Syria is justified. Meanwhile, president Obama will brief high-ranking members of Congress on his plans today.
Alastair Newton, senior political analyst at Nomura writes that the U.S. will probably delay a military strike against Syria until after the G20 summit in September. And it's likely to do so with or without the UK and France.
But the most important takeaway is this: "We cannot emphasize too strongly that, whatever option may be adopted we see little or no direct threat to global oil supply emanating from a U.S. strike against the Syrian regime."
In the aftermath of the coup in Egypt, Brent prices moved to the lower end of $105 - $120 per barrel range because of "misplaced, we believe concerns over the security of the Suez Canal," he writes. "We therefore see sentiment, ie, perceived geopolitical risk, rather than reality (with all due respect to Henry Kissinger’s famous quote, ie, “Perception is reality”) as the primary driver of the 15% or so increase in the price of Brent over the past two months."
Newton adds that even if a strike on Syria "does not lead to mission creep" i.e. an expansion of the mission beyond its initial goal because the first strike is successful, we have to take a bigger picture view of the situation. And the view is "bleak," since regional tensions will be exacerbated.
Bottom-line: A strike won't pose a direct threat to oil supply, but perceived political risk will impact prices.
"We therefore see recent price action around Brent in particular as an overreaction to the prospect and therefore expect the price to dip again after a strike (if not, perhaps, even before any military action relative to yesterday’s high)."
But perceived political risk in the Middle East and North Africa (MENA) is expected to push Brent prices to the upper end of $105 - $120 per barrel range through the third and fourth quarters.