US Stocks Pull Back On Iran Warship Concerns


liebermanInvestors pulled back on renewed geopolitical concerns after Israel’s foreign minister warned against Iranian “provocation” in the Suez Canal.

Stocks pulled back, with the Dow Jones Industrial Average higher by 20 points, or 0.2%, to 12247, about 50 points off its intraday high. The Standard & Poor’s 500-stock index pared its gains to edge up three points to 1331, after a morning that saw the index trade at more than double its financial-crisis low.

Investors were cautious after Israeli foreign minister
Avigdor Lieberman said two Iranian gunboats are planning to move through the Suez Canal to Syria, spurring concern that Middle Eastern oil shipments will be disrupted.

Oil climbed as much as 1.9 percent after Lieberman called the move he expects later today a “provocation.” The possible move by Iran comes five days after Egyptian President Hosni Mubarak stepped down. The Associated Press reported the first- ever protests against Libyan leader Muammar Qaddafi as demonstrations took place in Bahrain and Yemen.

“This is the latest addition to the Middle East risk premium,” said Phil Flynn, vice president of research at PFGBest in Chicago. “This is a knee-jerk reaction to the headlines that Iran is planning to send two warships through the Suez Canal.”

Crude oil for March delivery rose 84 cents, or 1 percent, to $85.16 a barrel at 1:51 p.m. on the New York Mercantile Exchange. The contract increased as much as $1.63 to $85.95. Prices are up 11 percent from a year ago.

Brent crude oil for April settlement advanced $2.03, or 2 percent, to $103.67 a barrel on the London-based ICE Futures Europe exchange. The contract touched $104.52, the highest intraday price since Sept. 25, 2008.

The Suez Canal Authority’s head of traffic, Ahmed El Manakhly, said that no Iranian gunboats have passed through the canal today. Speaking by telephone, El Manakhly also said that he hasn’t been informed of any Iranian warships planning to pass through the waterway later today.

‘Greater Impact’

“The tension in the Middle East is having a greater impact on the Brent market,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “This has a much bigger impact on Europe, we don’t get as much oil from the Middle East.”

Iranian security officers used tear gas and baton charges to break up a Feb. 14 rally in Tehran, according to Al Jazeera television. Two people were killed in anti-government protests in the Iranian capital, Iran’s Press TV reported yesterday.

“What the Iranians are doing has happened before,” Flynn said. “When there is dissent at home, leaders in the region like to raise tension with Israel to take the focus off other frustrations. This will leave Israel feeling nervous and increase tensions in the region.”

Israeli Prime Minister Benjamin Netanyahu says Iran is trying to get Egypt to break its peace treaty with Israel. Netanyahu was speaking today to a conference of U.S. Jewish leaders in Jerusalem.

Libyan Protesters
In Libya, where Qaddafi has held power since leading a military coup in 1969, protesters gathered in the port city of Benghazi and demanded the overthrow of the government, chanting “No God but Allah, Muammar is the enemy of Allah” and “Down, down to corruption and to the corrupt,” the AP reported.

Libya pumped 1.59 million barrels of crude a day in January, making it the eighth-biggest oil producer in the Organization of Petroleum Exporting Countries, Bloomberg News figures show. Iran, with output of 3.72 million barrels a day, is OPEC’s second-biggest producer after Saudi Arabia.

Bahrainis took to the streets for a third day of pro- democracy rallies as Yemeni demonstrators clashed with police. Bahrain’s interior minister, Sheikh Rashid bin Abdullah al- Khalifa, apologized for the killing of two protesters in clashes with security forces this week, saying an investigation is under way, the official Bahrain News Agency said.

The dissent in Bahrain, home to the U.S. Navy’s Fifth Fleet, follows the toppling of autocratic rulers by popular movements in Egypt and Tunisia and marks the spread of unrest into the Persian Gulf.

‘Risks Are High’
“We, and even the most adroit political commentators, simply do not know how things will pan out,” a team led by Lawrence Eagles, head of oil research at JPMorgan in New York, said in a report. “What we do know is that risks are high and rising and yet do not appear to be fully priced into options markets.”

U.S. crude-oil stockpiles climbed 860,000 barrels to 345.9 million last week, an Energy Department report showed today. A 2 million-barrel gain was forecast, according to the median of 13 analyst responses in a Bloomberg News survey.

“The inventory numbers were a lot more bullish than the market expected,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “The unrest in the Middle East could have an even bigger impact on prices. We’re now seeing protests in Libya, which is a major oil producer and exporter.”

Gasoline supplies rose 205,000 barrels to 241.1 million, the highest level since March 1990, the report showed. Analysts projected a 1.85 million-barrel increase. Stockpiles of distillate fuel, a category that includes heating oil and diesel, declined 3.1 million barrels to 161.3 million.

Oil volume in electronic trading on the Nymex was 691,521 contracts as of 1:51 p.m. in New York. Volume totaled 871,147 contracts yesterday, 19 percent above the average of the past three months. Open interest was 1.56 million contracts.

{The Wall Street Journal/}