Market Insider

Russian jet incident boosts geopolitical premium in oil

Global fears & your money

Oil prices rose Tuesday as traders priced in more geopolitical risk after Turkey downed a Russian jet fighter on the edge of Syria.

But the market reaction was more muted in some asset classes more than might be expected, given past responses to geopolitical events. Treasury yields were lower, but there was not a huge flight to safety trade, and some strategists said the market was responding more to the idea that the Fed could hike rates next month. Stocks fell globally on the reports, but Wall Street recovered much of its losses in late morning. By early afternoon, the Dow and were mixed.

"Oil is the most affected by it. You have major pipeline infrastructure that comes through Turkey out to the Mediterranean," said John Kilduff, analyst with Again Capital. "You've got the northern Iraqi oil field controlled by the Kurds. You have a lot hanging in the balance."