Oil subsides – for the moment

With the war in Lebanon still raging, it seems that the market has reached the top for the time being. The market is no longer reacting to the incremental elements of the attacks by Israel on the Lebanon and has eased back. Even though Israeli fighter planes ravaged the Lebanon during the weekend, it is generally felt that at the moment it can be contained within the local of the region.

At the same time, during the weekend Iran has made conciliatory gestures relating to its stand off with the west and the UN relating to its nuclear program. On Sunday Iran that Western incentives to halt its nuclear prom were an acceptable basis to look at resuming talks and that it is now ready for more detailed negotiations.

Light sweet crude for August slide $1.13 to $75.90 a barrel on the NY Mercantile Exchange.

Whilst the fighting goes on in the Lebanon it is clear that the reaction of Israel to the Hezbollah attacks has not only shocked the world, but more importantly it has shocked the Arab world as well.

We suspect that the only positive fall out of the Israeli attacks are that, for the short term at least, the Arab world will not want to provoke any further escalation that could see incursions into their own lands by the Israeli’s.

Iran’s major fear at the moment is that the Israeli’s may well carry out their previous threats to bomb Iranian nuclear facilities, especially as they would have nothing to lose at the moment.

There are, however, no guarantees at the moment, we expect an emboldened Israel will at some point, launch precise attacks on Syria in the hope of ridding it of both Hezbollah and Hamas leadership. If this where to happen then the reaction of the Arab world would be very predictable and the oil fields would stop.