September 2006
Country risk September 2006: The repercussions of oil and conflict
by Paul Pedzinski, Florian Neuhof
The latest country risk poll reflects a global economy in good health, despite a period of stock market volatility and the prospect of a slowdown. But the Middle East and the high price of oil could have far-reaching implications, writes Florian Neuhof. Research by Paul Pedzinski.
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| Oil and the region that produces it continue to be a source of instability. |
Country risk: Methodology
THE LEBANON CRISIS has once again focused the world’s attention on the Middle East, but it came too late to have had a dramatic impact on Euromoney’s latest country risk poll. Israel dropped by only two places in the rankings, from 38 in March to 40 in September, for example. Lebanon went down to 106 from 98, but such fluctuations are not unusual at the lower end of the spectrum. As the region has become accustomed to turbulence, rankings have remained relatively stable throughout; only Iran has shown a steady trend since last September, its ranking falling from 73 to 89.
Middle East rankings in this respect mirror the risk premium that is added to the price of oil. They reflect the dangers and instability of the region, which have a long-term detrimental effect on both ranking and oil price. “Middle East tension is an obvious contributor to the risk premium on oil. The market has already priced this in, and the current situation will keep prices from softening,” says Robert Kelly, CEO of CountryWatch. So, although the conflict in Lebanon has not increased oil prices significantly, it is also doubtful whether or not it will undermine rankings in the region on the whole.
More information on country risk
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