With two long-term North African leaders overthrown and big question marks over the short term prospects for two others, it was little surprise to see London’s index of leading shares lose ground this week. After touching a year-high of 6,100 points towards the end of last week, the FTSE 100 (UKX) had slipped to 5,900 by lunch on Thursday. Analysts predicted further falls as uncertainty in increasingly important strategic areas of the Middle East continued to emerge.
The recent toppling of Zine el-Abidine Ben Ali in Tunisia and Hosni Mubarak in Egypt have proved to be a mere prelude to an alarming and bloody insurrection in Libya. While the human cost of the turmoil deservedly saturated the headlines it was hard to get away from potentially disastrous economic consequences, particularly given Libya’s position as an important oil exporter. Production disruption and fears that Colonel Muammar Gaddafi and his supporters could adopt a scorched earth policy helped drive up the price of Brent crude to $115 a barrel. Turning to Bahrain, where protestors have also been attempting to force political change, analysts indicated that the impact on oil and gas supply could be even more serious depending on the outcome. In particular, anxiety rests on whether a violent uprising in Bahrain could trigger similar problems in other major oil producing countries in the region.
Despite the news out of Libya the BP share price largely held firm at around 494p as the oil and gas giant evacuated many of its staff from the country. Back in 2007 BP signed a controversial $900m oil drilling deal with the government there but production is still believed to be years away. Earlier in the week, BP said it had teamed up with Reliance Industries of India in a deal that will see it take a 30% stake in 23 oil and gas blocks in the country. Meanwhile, the Royal Dutch Shell share price benefitted from news of rising oil prices. On Monday the oil group said it was selling most of its stake in its downstream businesses in Africa to Vitol and Helios Investment Partners for $1bn. It will retain equity in two new joint venture companies which will own and operate Shell’s existing oil products, distribution and retailing businesses in 14 African countries and another which will own and operate Shell's existing lubricants blending plants in seven countries.
Oil…
