In case you were too busy watching Messi’s new goal celebration moves, you should know that the U.S. just fired dozens of missiles into Syria.
Back up. What’s happening in Syria again?
Back in 2011, a movement called the “Arab Spring” protests had unseated leaders such as Egypt’s Hosni Mubarak and Tunisia’s Zine El Abidine Ben Ali. The protest fever (the ones that can’t be resolved with a soda) eventually reached Syria.
Problem is, the government, led by President Bashar al-Assad, responded to the protests by allegedly detaining, torturing, and killing demonstrators.
The government’s violent response didn’t sit well with the Syrians and economic woes, discontent over the government, and a couple of defection from the military eventually turned the protests into an armed conflict.
Over time, the conflict turned more sectarian. The Syrian government found allies in Shia-oriented groups such as the Iranians, Iraqis, and Lebanon’s Hezbollah, while Sunni-dominated groups from Turkey, Saudi Arabia, Qatar, and even ISIS (now known as ISIL) support the rebels.
Where do the U.S. and Russia factor in the conflict?
The violence of the civil war and the presence of ISIL have attracted calls for foreign intervention in Syria.
The U.S., which has the strongest military in the world, led a coalition that targeted ISIL territories and regularly campaigned against Assad. Meanwhile, Russia, which is right behind the U.S. in military force, has chosen to back Assad and fight “terrorist groups” in Syria.
Okay, so what exactly happened today?
According to the Defense Department, two U.S. warships – the USS Ross and the USS Porter – fired 59 Tomahawk missiles from the Mediterranean Sea and into the Shayrat Airfield in Western Syria where a chemical attack was believed to have originated.
Remember that earlier this week the Syrian government was accused of using chemical weapons consistent with Sarin gas poisoning against civilians in the province of Idlib. The attack, which is illegal under the Geneva Protocol, is said to have killed at least 83 people including 30 children.
Reports by the province’s Governor and the Syrian Observatory for Human Rights estimates that at least four people were killed and seven were wounded in the U.S. missile strikes.
In a short presser, Trump defended the move and said that
“There can be no dispute that Syria used banned chemical weapons, violated its obligations under the Chemical Weapons Convention and ignored the urging of the UN Security Council. Years of previous attempts at changing Assad’s behavior have all failed and failed very dramatically.”
He also added the U.S. must “prevent and deter the spread and use of deadly chemical weapons” and that the missile attack was in the nation’s “vital national security interest.”
How did other world leaders react?
U.S. allies were quick to give their virtual thumbs-up, basically saying that it was the “appropriate” response for the chemical weapons attack. So far, those on team “yay” include the U.K., Japan, Australia, Turkey, Saudi Arabia, Germany, France, and the European Council.
Meanwhile, Russia, Iran, and the Syrian government are firmly on team “nay.” Russia labeled the attack as a “violation of international law” and “an aggression against a sovereign state…under a far-fetched pretext.”
Russia has also suspended the Memorandum on the Prevention of Incidents and Ensuring the Safety of Aviation Operations during Operations in Syria with the US (read: anti-accidental conflict in Syria talks) and called for an emergency meeting of the UN Security Council. Duhn duhn duhn.
How did financial market players react?
Last night’s attack marked the first direct move against Assad’s regime since the U.S. first started dipping its toes into Syria’s conflict six years ago.
Naturally, the possibility of shakier geopolitical tensions sent traders into “safe haven” assets. Investors flocked to government bonds, gold, and low-yielding currencies while the Asian bourses took hits.
Even oil prices received a boost on the prospect of oil production in the Middle East getting affected by an escalation of military attacks.
The overall risk aversion didn’t last, however. Market players soon attributed the attack as a one-time deal as soon as U.S. officials started hinting that the move wasn’t a shift in Trump’s policy in Syria. If you recall, Trump has concentrated his battle against ISIL rather than Assad.
Asian equities markets eventually recovered their losses while the low-yielding yen lost some of its gains before the Asian session break.
Of course, it also didn’t hurt that short-term traders likely took off their positions ahead of other major catalysts like the NFP report (don’t forget to read our trading guide!) and Trump concluding his meeting with Xi Jinping.
For now, it looks like traders are treating the missile strikes as a temporary catalyst rather than a market-moving shift.
Watch out for hot headlines over the next few days though. Violent counterattacks by Assad and friends could escalate geopolitical tensions and cause overall risk aversion, which could then weigh on high-yielding assets across the board. Y’all better have your positions protected (if they aren’t already) if and when these headlines hit!