The Senate Foreign Relations Committee gave its blessing to President Barack Obama’s plan to take limited action against the Syrian regime for using chemical weapons against its own people. A full Senate vote is expected in the next few days and will likely pass. Barring any hiccups in the House, the bombs could start falling from the sky as soon as next week.
Whenever the words “Middle East” and “war” get mixed in the same sentence, people get nervous. It’s a messy and complicated part of the world with ever-shifting alliances and unlikely bedfellows.
Devoutly Sunni Saudi Arabia supports the secular military regime in Egypt, while constitutionally secular Turkey supports the deposed Muslim Brotherhood. In Syria, a secular nationalist regime is supported by radical Shia Iran and Orthodox Christian (and formally communist) Russia. And Lebanon? Its political arrangements resemble something from The Godfather.
You might think that hatred of Israel is the tie that binds, but even this is a half-truth. Although the two countries have no formal relations, Israel and Saudi Arabia have become allies of sorts, and rumors have flown in recent years that the Saudis have given the nod to the Israelis that it might — wink wink — be OK for their jets to cross Saudi airspace en route to bombing Iran’s nuclear facilities.
This is why an airstrike on Syria gives us the jitters. The fear is that, given how complicated the relationships are, a “limited” response could escalate into something much bigger, dragging in other regional players such as Iran, or even Russia.
Colin Powell warned George W. Bush that if he broke Iraq, he owned it. No one in Congress or the White House wants to “own” Syria.
So with all of this as background, should investors worry about Syria?
Not really. You should watch the headlines and be aware that events can change quickly. But consider the following:
- The Western response is intended to punish the Assad regime but not remove it. Assad will not escalate and give the West an incentive to remove him … particularly since he is winning the war.
- Syria’s options for retaliation are few and likely ineffective. Could it attack Israel in the hopes of rallying the Arab street? Maybe. But Saddam Hussein tried that in the first Gulf War to little effect.
- Iran is not likely to join the fray. Think about it. If it sits tight, its ally in Syria will take some damage but will hold on to power.
- Vladimir Putin’s Russia likes to antagonize the West, but this isn’t the 1980s. Russia has little to gain from letting this escalate too far, particularly given that their ally is winning the war.
- Syria is not an oil-exporting country. Unless Iran enters the fray and closes the Straits of Hormuz — which again, is unlikely — any additional spike in the price of oil should be a temporary blip.
There are plenty of macro risks out there to consider. Front and center is the Fed’s tapering of its quantitative easing program, and Europe’s sovereign debt debacle is the crisis that never seems to end.
Syria is not something you spend time worrying about.
Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. As of this writing, he did not hold a position in any of the aforementioned securities. Click here to receive his FREE 8-part investing series that will not only show you which sectors will soar but also which stocks will deliver the highest returns. The series starts November 5 and includes a FREE copy of his 2014 Macro Trend Profit Report.
