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Will Middle East Turmoil Unseat the Global Recovery?

Catherine Holahan 
Tuesday, 22 Feb 2011 | 11:39 AM ET

Will Middle East turmoil unseat the global recovery? That was the question Fast Money Traders were asking Tuesday morning as the threat of civil war in Libya fueled a surge in oil prices.

“This is calling the whole economic recovery (into question), says Stephen Weiss, co-founder of Short Hills Capital, depending on where oil goes.” .

Libya, the world’s 17th largest oil producer, erupted in violence over the weekend after soldiers loyal to Libyan leader Col. Moammar Gaddafi reportedly shot anti-government protestors. The increased violence between pro and anti-Gaddafi forces stirred fears that Libya could temporarily halt the supply of the 1.6 million barrels of crude it produces each day.

Those concerns sent oil prices surging Tuesday morning.

The head of the International Energy Agency has warned crude prices hitting $100 a barrel could be bad news for economic growth. "That is our concern, regardless of the margins of disruption, if the $100 per barrel of oil is continued in 2011, the burden of oil to the global economy is as bad as 2008," Nobuo Tanaka, the Executive Director of the International Energy Agency told CNBC on the sidelines of a major oil conference in Riyadh.

(Get the whole story. Click here for IEA Chief: $100 Oil 'Very, Very Bad' for Economy)

Similar concerns are quickly rippling across Wall Street; with investors keeping a very close eye on prices at the pump. The price of a gallon of gasoline was already at $3.15, according to the U.S. Energy Information Administration.

A rise toward the $3.40 level has significantly curbed consumer spending in the past, noted Stephen Schork, editor of The Schork Report. If oil prices remain in the high 90s, U.S. consumers could see $3.40 per gallon gasoline by summer, he said.

  • Top 20 Oil Producers and Exporters
  • Gaddafi Vows to Fight on, Die a Martyr

Kanundrum Capital’s Brian Kelly was playing the oil fear with a contrarian safety trade. Instead of buying the dollar , as many traders were apt to do given its status as the world’s reserve currency, Kelly was considering buying euros . Any threat to the U.S. recovery would likely be met by more action by the Fed to increase liquidity, leading to a weaker dollar and stronger euro, said Kelly.

“If you get a contraction in global trade, then you have QE3 coming into play which will weaken the dollar and makes Europe the safe haven play,” Kelly speculates.

However, other investors are biding their time; there are still plenty of oil bears that cautioun events in Libya may be a lot of tempest in a pot of tea.

By mid-morning oil prices had retreated from their highs due in large part to assurances from OPEC that it would increase production to offset any reduced supply from Libya.



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Trader disclosure: On Feb 22, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL); Semour owns (BAC); Seymour owns (F); Seymour's firm is short (FXI); Seymour owns (GM); Seymour owns (INTC); Seymour's firm is short (POT); Seymour owns (TTM); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Adami's wife works for (MRK); Weiss owns (AAPL); Weiss owns (AGU); Weiss owns (CSCO); Weiss owns (IPI); Weiss owns (JPM); Weiss owns (MSFT); Weiss owns (QCOM); Weiss owns (VZ); Weiss owns (COP); Weiss owns (DVN); Weiss owns (MEE); Weiss owns (BTU); Weiss owns (CNX); Weiss owns (HK); Terranova Owns (VRTS); Terranova Owns (C); Terranova Owns (UPL); Terranova Owns (GM); Terranova Owns (MS); Terranova Owns (SLXP); Terranova owns (TEVA); Terranova Owns (BAX); Terranova Owns (CVI); Terranova Owns (RSX); Terranova Owns (SU); Terranova Owns (CNQ)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
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Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (DPUKF)

For Brian Kelly
Accounts Managed By Kanundrum Capital Own (AGO)
Accounts Managed By Kanundrum Capital Own (AMD)
Accounts Managed By Kanundrum Capital Own (INTC)
Accounts Managed By Kanundrum Capital Own (ATW)
Accounts Managed By Kanundrum Capital Own (DBA)
Accounts Managed By Kanundrum Capital Own (EBAY)
Accounts Managed By Kanundrum Capital Own (FRO)
Accounts Managed By Kanundrum Capital Own (MCP)
Accounts Managed By Kanundrum Capital Own (PGH)
Accounts Managed By Kanundrum Capital Own (PWE)
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (IAU)
Accounts Managed By Kanundrum Capital Own (TER)
Accounts Managed By Kanundrum Capital Own (TLT)
Accounts Managed By Kanundrum Capital Are Long Treasury Bond Futures
Accounts Managed By Kanundrum Capital Are Long Oil Futures
Accounts Managed By Kanundrum Capital Are Long The Euro
Accounts Managed By Kanundrum Capital Are Long the British Pound
Accounts Managed By Kanundrum Capital Are Short The Australian Dollar
Accounts Managed By Kanundrum Capital Are Short The U.S. Dollar

For Dennis Gartman
Funds managed by Dennis Gartman are long Aussie Dollars
Funds managed by Dennis Gartman are long Canadian Dollars
Funds managed by Dennis Gartman are long Gold
Funds managed by Dennis Gartman are long Wheat
Funds managed by Dennis Gartman are long Corn
Funds managed by Dennis Gartman are long Soybeans
Funds managed by Dennis Gartman are long Sugar
Funds managed by Dennis Gartman are long Crude
Funds managed by Dennis Gartman are long Natural Gas
Funds managed by Dennis Gartman are short Euros
Funds managed by Dennis Gartman are short British Pound Sterling
Funds managed by Dennis Gartman are short Yen

For Anthony Scaramucci
SkyBridge Capital is a fund of funds manager. Funds held may or may not own the recommended securities.

For Andy Busch
Busch has no disclosures

For Rich Ilczyszyn
Ilczyszyn has no disclosures

For Scott Nations
Nations has no disclosures

For Gene Munster
(ACOM), (DANG), (DRIV), (LOGM), (MOBI), (RLOC), (YOKU) have been investment banking clients of Piper Jaffray during the past 12 months
Piper Jaffray expects to have (DANG), (DRIV), (MOBI), (YOKU) as investment banking clients within the next three months
Other material conflicts of interest for Gene Munster or Piper Jaffray regarding companies in my universe for which I am aware include (ACOM), (DANG), (DRIV), (MOBI), (RLOC), (YOKU): underwriting
Piper Jaffray received non-investment banking securities-related compensation from (DRIV) during the past 12 months
Piper Jaffray makes a market in (AAPL), (ACOM), (AMZN), (BIDU), (DANG), (DRIV), (EBAY), (FMCN), (GOOG), (GSIC), (IACI), (KONG), (LOGM), (MCHX), (MELI), (MOBI), (PRTS), (RLOC), (SINA), (SOHU), (VCLK), (WWWW), (YHOO), (YOKU) and will buy and sell the securities of these companies on a principal basis:

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