Bombs or Booms? Asia Pushes Oil Prices Higher

The surge in oil prices seems to have the Middle East written all over it.

Israel’s confrontation with Hezbollah in Lebanon is unnerving markets already jittery over Iraq and Iran. Africa also is thought to have a role. Declining production in Nigeria is helping to keep crude oil above $73 a barrel. All these risks may push oil well above the recent record of $78.40.

The conventional wisdom that bombs and geopolitical risks are boosting oil prices and shaking up stock and bond markets is only half right. The other catalyst is one that won’t soon go away: Asia’s economic boom.

“While we recognize the risks associated with a supply shock in the oil patch, we believe investors should be just as concerned about the slow-motion demand shock evolving from Asia,” said Joseph Quinlan, New York-based chief market strategist at Bank of America.

Bloomberg