Three minutes after the announcement of the terror attack in the U.S., oil prices started to surge. Within minutes crude prices were up 15% as panic engulfed everybody, from Joe Chevrolet to investors.
The ubiquitous fear was that the events would spark escalating violence in the Middle East, which would slash production by the main suppliers, Iran and Iraq.
The public usually makes a beeline for commodities at times of unquiet or uncertainty in the financial markets. Suddenly gold, platinum and oil shine bright again.
The panic subsided pretty fast, with oil ending the day only 5% up, and opening trade in the West Wednesday morning with further drops. It's now trading below its pre-terrorism price.
"The market showed maturity," says Dr Amit Mor, manager of ECO Energy, director of Tel Aviv-based Amit Consulting & Enterprising and an expert on energy, infrastructure, and environmental economics. He is also an expert on the global energy market.
It is in OPEC's interest to continue producing oil as usual, Mor says. That goes for Iran and Iraq too. That is why the OPEC nations rushed to show solidarity with the United States and to condemn the attacks, he explains.
In pieces bearing headlines such as "Horror in the White House", Hardline Iranian newspapers said on Wednesday the United States was paying the price for supporting Israeli aggression. But reformist Iranian President Mohammad Khatami condemned the attack and called for the international community to take measures to eradicate such crimes.
Iran and Iraq export 7% of the world's oil, Mor says. "Khatami can fly the flag of freeing Palestine from Zionist rule and Saddam can pay $10,000 to each Palestinian shaheed (martyr), an outlay equivalent to 500 barrels of oil, but that's lip service. From there to halting sales of oil is a long distance," Mor says.
In the extreme scenario of Iran and Iraq halting oil production, Saudi Arabia ? the biggest exporter in the world, proving 10% of the world market with a capacity of 3 million barrels a day ? could cover for them in no time.
This, Mor says, is why the markets calmed down, on second thought. The sudden uncertainty sparked a terribly human reaction of wanting to shelter in a safe harbor of good old commodities.
The problem will only grow to serious proportions if consumers succumb to psychological pressures and reduce spending. That would topple the economy into read recession, which would ultimately reduce the demand for energy.
Before the attack, the price of North Sea Brent crude jumped 18% over three weeks. The leap was because of OPEC's decision from August to cut production by a million barrels a day as of September 1, Mor explains. That, coupled with the drop in American oil reserves, sparked the price rise.