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Osama Bin Laden Killing Makes Little Impact on Oil, Gold, U.S. Stocks

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After the U.S. military’s daring raid that killed Osama bin Laden on Sunday, Americans spilled into the streets to celebrate the demise of the architect of the attack on the World Trade Center nearly 10 years ago, but on Monday, the markets reacted to the news with little fanfare.

Oil, gold and U.S. stocks all showed a mild increase in the morning and then dropped slightly in midday trading.

“It’s an incrementally safer world. The geopolitical premium that’s in oil has shrunk a little bit today,” said Alec Young, equity strategist with Standard & Poor’s Equity Research, in an interview just after noon. “Oil is down a little today. The oil markets are viewing the bin Laden killing as reducing geopolitical risk, but at the margin. You had a $113 per barrel oil asset on Friday, and now it’s at $112.”

Stocks were flat in midafternoon trading on Monday, with the Dow Jones industrial average up 11 points, 0.1% higher, at 12,822. The S&P 500 was flat, at 1,364. Light crude was down 0.09 point, or 0.08%, at $113.84, and Comex gold was up $2.10, or 0.13%, at $1,558.10.

According to Morningstar, shares of the iPath S&P GSCI Crude Oil TR Index (OIL) exchange traded fund rose slightly in morning trading and had dropped 0.11% by midafternoon to $29.95. The SPDR Gold Shares (GLD) ETF also rose in the morning and was down 0.41% to trade at $151.75.

If bin Laden had been killed closer to Sept. 11, 2011, and al-Qaida were more of a clear and present danger in the immediate wake, “you would see a much bigger market reaction,” S&P’s Young said. “It’s psychological. These are human beings trading, so it’s emotional. Is there really any relationship between this guy being alive or dead and the price of oil? I don’t think so, but people will trade on it.”

“It’s important to remember that as big of an event as this is on an emotional level, and from an intelligence and military perspective, there are a lot of things that impact markets,” Young noted. “Traditionally, something like this is not at the top of the list. There’s earnings, there’s interest rates, inflation trends and commodities prices, so this event competes with a lot of things.”

After an initial burst of euphoria at the open, the overbought stock markets saw some profit-taking and then calmed down, he said.

“Yes, it’s good that bin Laden’s gone, but you can argue that he’ll be martyred now,” Young said. “For every positive case you can make economically, you can make just as negative a case. So it’s not conclusive that this is good or bad for the stock market and the global economy.”

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(See complete coverage of 9/11: Ten Years After on AdvisorOne.)


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