Iran and Iraq holding hands?? US investors bury their heads in the sand

Big question! Is Friday's collapse in the FTSE the result of

• the Bank of England's announcement that interest rates are to rise?
• because of the horrendous news from Iraq (thank you Messrs Bush and Blair)?
• or is it the market finally moving away from its current high levels? 

I think it is a combination of all of these things. The Iraq situation generates anxiety, the prediction of higher interest hits the relative return on shares and it is strange the way that a tiny drop of a catalyst in the water suddenly changes the whole mood of the market.

But then we have the strangest thing of all. The US markets make a small rally on Friday. My only conclusion is that the bulk of investors are fearless - not their money. They will go on sitting behind their bank desks and taxpayers will bail out the institutions which will be crucified by the inertia of their traders. They don't care that the rise in UK interest rates may be the first ripple and that a tidal wave of rises may follow. They don't care that oil prices are on the rise because of the prospect of US  forces marching side by side with their arch enemies to push back Sunni Muslim insurgents who have captured large areas and amjor cities in Western Iraq (the insurgents go under the name of ISIS).

The spike in the oil price has yet to become dramatic. But it is a warning of what may happen if the situation deteriorates.

The US markets have hardly moved on the open today. It's all a bit like Tony Blair denying that the invasion of Iraq is the cause of the present situation. I understand he claims that the cause is lack of intervention in Syria. 

Many may die laughing in Iran as they savor the sight of the Great Satan limping about having shot himself in the foot. Only later will they die for real as battle lines are drawn.

Mark Carney may have done UK investors a huge favour. They may pull out of stocks in advance of a bigger world downturn.

Seven years ago I made an analysis of what ails the Middle East. I published it as a short series of essays on a blog called Thinkhard.org. The articles are still there and with the events of that last few days it seems remarkably prescient. Have a look here for an explanation of how the region is cursed by its oil wealth. It is one of five essays. Links to the others are 

Here for the Sunni Shia divide

Here for where the oil sits 

Here for a thumbnail sketch of who the people of the Middle East are

Here for a description of how my review came about