HONG KONG — The resignation of Hosni Mubarak after a 30-year reign as modern-day pharaoh of Egypt has demonstrated the nervous and potentially combustible connection between oil and politics in the Middle East. As soon as Mubarak quit after weeks of demonstrations, oil prices dropped, but quickly rose again, and benchmark Brent crude touched $103 a barrel as new political protests erupted in Bahrain and Iran amid certainty about who would really rule Egypt.
It looks as if it will be a stormy springtime for oil and hence for the world economy. There are reasons to be jittery, not least because of a dangerous mix: Politics, economics, social unrest, religion, and oil supply and demand are working together. The fear is not only for Egypt but of contagion across the Middle East, with the political explosives detonating the economic damage.
Egypt after all is not a major producer of oil. Its production of 662,000 barrels a day accounts for just 0.8 percent of total world production, and most of it is consumed domestically. What has got the markets worried is that Egypt also controls the Suez Canal, whose very name is evocative of world trade and the potential for disruption. In the 1956 crisis, about 10 percent of global oil production was removed and it took more than six months to get the canal back to normal and production flowing freely.