Nothing highlights how uncertain global markets can be quite like an oil scare. In the wake of presumed attacks on oil tankers in the Gulf of Oman on Thursday – the second such incident in the last month or so – oil prices surged by around 4%. This followed a drop of around 4% on Wednesday, when worries about global trade and growth dominated.
The volatility of the oil price serves as a powerful reminder of just how emotional and unpredictable Mr. Market can be. The fundamentals underlying the oil price for the last few years have been fairly constant: solid global economic growth, strong and rising oil supply from US fracking fields, and ongoing disruptions in Iran and Venezuela. Nothing much changed this week, yet the oil price has been on a rollercoaster due to sentiment and anxiety.
The lesson for all of us is to try and see past the immediate ups and downs of the market or the news cycle and instead try to focus on the underlying fundamentals. In the end, that’s what really matters.
