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The Gaddafi lesson for Syria. Will VIX and Brent Oil follow the same pattern?

Stefano Fugazzi (ABC Economics) – The odds are against Syrian president Bashar al-Assad. As the conflict in Syria intensifies with US President Obama urging Russia to “act together against terror”, Assad’s days in power are nearing the end.

Will VIX and Brent Oil follow the same pattern?

The following analysis aims at observing how VIX (see HERE for a definition) and Brent Oil moved during two of the most noticeable Western-allied and sponsored uprising in the Middle East in 2011, actions which eventually overthrew  both Muhammad Hosni El Sayed Mubarak (hereafter referred to as ‘Mubarak’) and Muammar Muhammad Abu Minyar al-Gaddafi (‘Gaddafi’).

Mubarak / Gaddafi (Part 1)

We observed a total of 27 trading days (13 prior and 13 subsequent to Mubarak’s resignation on 11 February 2011).

Key events:

  • On 25 January 2011, thousands of protesters in Egypt gathered in Tahrir Square, in Cairo. They demanded the resignation of President Hosni Mubarak.
  • On 11 February, the President of Egypt Hosni Mubarak resigned, and transferred his powers to the Supreme Council of the Armed Forces.
  • On 15 February protests broke out against Muammar Gaddafi’s regime in Benghazi, Libya, starting the uprising that would soon turn into the Libyan Civil War.
  • On 3 March, the former Prime Minister of Egypt, Ahmed Shafik, also resigned, after protests.
  • In Libya, on 2 March, government forces attempted to recapture the oil port town of Brega, but the attack failed and they retreated.
  • 19-20 March: start of the French/NATO Coalition air operations in Libya.

click to enlarge graphs

arab spring1

Gaddafi (Part 2)

We observed a total of 51 trading days, from 30 June to 12 September 2011.

Key events:

  • On 15 July 2011, at a meeting in Istanbul, over 30 governments recognised the National Transitional Council (NTC) as the legitimate government of Libya.
  • 28 July: acceleration of the rebel’s offensive with a number of towns being “freed” on 3-8 August.
  • On 16 August, rebel forces supported by NATO air strikes started a 48-hour operation securing key towns such as Gharyan around the capital. They then began cutting off fuel and supply lines, effectively leaving Tripoli under a state of siege.
  • On 18 August, US officials reported that Gaddafi was making preparations to flee to exile in Tunisia with his family. The same day, rebel forces seized control of the crucial oil refinery in Zawiya while journalists confirmed that they were in complete control of Gharyan.
  • Between 20 and 28 August, the Battle of Tripoli, occurred, in Libya. Rebel forces captured, and effectively gained control of, the capital city of Tripoli, therefore practically overthrowing the government of the dictator Muammar Gaddafi.
  • On 25 August, the Arab League recognised the NTC to be “the legitimate representative of the Libyan state”, on which basis Libya would resume its membership in the League.
  • As the Battle for Tripoli reached a climax in mid-August, the Gaddafi family were forced to abandon their fortified compound.
  • End of August: After the fall of Tripoli, Gaddafi’s son Saadi stated in various media interviews that he had been authorised to negotiate a transfer of power to the NTC.

click to enlarge graphs

arab spring2

How did VIX and Brent Oil perform?

We noted that VIX and Brent were largely unaffected by the fall of Mubarak (see data prior to 11 February 2011).

We can see both VIX and Brent rising throughout February 2011 as the focus shifted towards Gaddafi’s oil-rich Libya.

Understandably both VIX and Brent were extremely volatile throughout the first two weeks of August 2011 before stabilising towards the end of August, and into September 2011, as the Libyan conflicted neared the end.

arab spring cover



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