France promises 'ruthless' response to Paris attacks
The war against Islamic State will no doubt escalate after the coordinated attacks in Paris on Friday. The response will be centered in the Middle East, including several oil producers.
It's early to try and analyse how France will responds but expect an escalation in the ISIS strongholds of Iraq and Syria.
Syria itself is a miniscule oil producer and not a factor for oil production. In general, Iraqi oilfields aren't in jeopardy from ISIS. Some fields in both countries, however, are controlled by ISIS and could now be targeted.
Just as likely is that a military escalation from France, the United States and Russia could help secure some disputed territories and protect Kurdish-controlled oilfields.
The case for higher oil
In general, the response from oil traders to geopolitical uncertainty is to bid up prices. That's what I expect early in the week, especially since oil has been battered so badly in the past two weeks.
The case for lower oil
Currently sentiment is really bearish, so this could be seen as hurting demand, so oil prices could fall further," said Amrita Sen from Energy Aspects in a Reuters report.
I don't exactly follow that line of thinking. Parisians will be a bit more inclined to stay home on Friday nights in the next few months but factories won't close and people will continue to drive to work.
Another argument is that European politicians may lose focus on improving the domestic economy. But the other side of that is pro-austerity politicians may feel less pressure to trim spending.
A final argument is that airline travel may again be restricted. Again, this wasn't an aircraft attack and oil didn't plunge on the Russian airline bombing so I think that's a low probability outcome.
The broader bullish case is that if this puts pressure on major oil producers like Saudi Arabia to accept Syrian refugees or if fighting expands in Libya