Sometimes Politicos Are More Rational Than Markets

Oil prices have “surged” above $73/barrel after the big news this weekend that Iran regards itself as a sovereign nation and would not simply hand over its resources to a country that attacked it.

U.S. Secretary of State Condoleezza Rice deflected concerns about the remarks. “We’re not going to react to every statement that comes out of Iran,” she told CNN’s “Late Edition.”

Oil traders, on the other hand, are going to react to every statement that comes out of Iran.

“The oil card — well, let’s just remember that Iran is some 80 percent dependent on oil in its budget” and would be unable to handle a disruption,” [Rice] said.

You’d expect a rational, efficient market to have factors like Iran’s regard for its own sovereignty and Iran’s need for foreign exchange priced in by this point in the Iranian nuclear fuel dispute. But, when talking about oil markets any expectation of efficiency or rationality is misplaced. It’s a sad market that is less rational than a government official, even if the official is Condi Rice. It will serve these speculators right when the bubble bursts…

Oil surges on Iran warning to US

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