22 May 2022

Fear Of Syria Strike Concerns Wall Street

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Fears over a potential strike on Syria sent stocks tumbling on Tuesday. The decline comes on news of the use of chemical weapons against civilians by Syrian President Bashar al-Assad’s forces.

At a meeting Istanbul between the Syrian National Coalition and other groups opposed to al-Assad’s government, sources said that “action to deter further use of chemical weapons by the Assad regime could come as early as in the next few days.” U.S. Defense Secretary Chuck Hagel said in an interview with the BBC that U.S. forces are ready to respond if given an order by President Obama.

The stock market retreated on this news, along with continued uncertainty over when the Fed will begin to taper the bond-buying program. Market concerns were reflected in a jump of more than 15 percent on the CBOE volatility index in the last two days.

Gold prices rose to a 15-week peak and prices of U.S. Treasuries rose as the tensions sparked a flight to safer investments. Oil prices also rose nearly 3 percent on the possibility that a strike in Syria could trigger wider unrest in the Middle East.

The situation has been developing for some time with the U.N. Security Council deadlocked on Syria since 2011. Russia and China have vetoed three resolutions condemning Assad and calling for punitive steps against his government. On Monday, U.S. Secretary of State John Kerry on Monday called for Syria to be held accountable for what he called a "moral obscenity" and laid the groundwork for possible military intervention.

U.S. Treasury Secretary Jack Lew said it was essential for Congress to raise the government's borrowing limit by mid-October or the country will face an unprecedented default, and warned the administration would not allow for it to be used as political leverage.
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