Carnage In Qatar: A Quick Recap Of Monday's Geopolitical Land Mine

by: The Heisenberg

- Something big happened in the Mideast on Monday, and whether or not your interest was piqued, you should at the very least make yourself aware of the basics.

- Here's a quick recap of the market response, which was quite dramatic.

- Bottom line: this market needs another geopolitical crisis like it needs a hole in the head.
 
 
Ok, so I feel like I'd be remiss if I didn't pen something quick for this platform on what happened in the Mideast on Monday.
 
I won't spend a ton of time on it (if you want the full treatment, it's available here) because it certainly occurs to me that the vast majority of readers likely aren't all that interested, but regardless of your interest level, you should at least be cognizant of the basics because the story underscores how quickly the geopolitical landscape can shift and how those shifts impact markets.
 
So, Qatar has found itself at odds with its regional partners at various times over the years for a number of reasons. Again, you can read the details in the post linked above, but for our purposes here, just note that the tension came to a head late last month when Qatari state media ran a series of comments purportedly delivered by emir Sheikh Tamim bin Hamad Al Thani at a military graduation ceremony. Those comments included conciliatory remarks about Iran and Hezbollah.
 
Needless to say, the Saudis weren't pleased, and although Doha was quick to deny the entire thing, blaming hackers for spreading "fake news", the genie was out of the bottle, and before you knew it, the situation spiraled out of control, culminating Monday in Saudi Arabia, Bahrain, the United Arab Emirates, and Egypt cutting diplomatic ties with Qatar.
 
What it looks like (on my end anyway) is that some folks who shall remain nameless saw an opportunity to tie Qatar to both Sunni extremism and Iran's regional power grabs in Syria and Yemen. So, basically, this allows the Saudis to pretend like they're taking steps to combat Sunni extremists by scapegoating Qatar, and they've been able to get other regional players on board by crying foul at Al Thani's maybe real, maybe make-believe friendly gesture towards the Iranians.

Why should you, as a US investor, care about this? Well, for one thing, the geopolitical landscape didn't need to get any messier. This makes the already convoluted proxy wars in Syria and Yemen even more convoluted, which in turn makes it even more unlikely that the regional will stabilize anytime soon. Further, it could very well have implications for the OPEC deal.
 
But drilling down, this wreaked all kinds of very real havoc on financial markets in Qatar (NASDAQ:QAT) on Monday.
 
Stocks plunged more than 7%, and bond yields jumped by more than 20bps:
 
(Source: Bloomberg)
 
 
Do note that this was no laughing matter.
 
For context, that was the steepest decline for stocks since 2009. Not a single one of the index constituents' shares rose on the day. Volume was 50% more than average, and by the time it was over, $9.2 billion was wiped out.
 
The Qatar QE index's RSI plunged deep into oversold territory:
 
(Source: Bloomberg)
 
And, perhaps most notably, 12-month riyal forward points rose 173 to 375:
 
(Source: Bloomberg)
 
 
This was a bloodbath - plain and simple. No hyperbole necessary.
 
Analysts are still sorting through the wreckage to figure out what this might mean going forward, and leaders are scrambling to prevent this from spiraling even further out of control, but the point is, this is not some poor country tucked away in a part of the world no one cares about (at the risk of coming across as crass).

What happened on Monday has major geopolitical implications which in turn means it's something you, as an investor, should at the very least keep tabs on.
 
Because again, this market needs another geopolitical crisis about like it needs a hole in the head.

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