(NECN: Peter Howe, Boston/Wakefield, Mass.) It was the biggest headline in the world Monday -- "Osama bin Laden Dead" -- including for world financial markets, which initially rejoiced and pushed stocks and the dollar up, oil and gold down.
But by the close of trading Monday, almost all those trends reversed, with major stock market indices down slightly, the dollar down against the Euro and Yen, and the price of gold up 70 cents to $1,556.70 an ounce, reflecting collective net pessimism about the economic and inflation forecast. Oil, which had dropped by nearly $3 a barrel in New York trading, came back up later on in the day and closed down just 41 cents at $113.52 per barrel.
"They're digesting the information: What does it really mean?'' said Sarah Emerson, president of Energy Security Analysis Inc. in Wakefield, Mass., of oil traders' reaction. The big question is whether in the long run this killing makes the Arab oil patch safer -- or more volatile. "If they perceive it as a reduction in the likelihood of terrorism, and the region's more stable, then oil prices are going to fall,'' Emerson said. "It could also indicate a reduction in stability, because you could actually see al Qaida seeking revenge, reprisals.''
Two ways reaction to the targeted killing of bin Laden at a compound 35 miles north of Pakistan's capital of Islamabad could push down oil prices: If investors feel more confident in the Middle East as a reliable supplier of oil, or if they feel more confidence in the national strength and might of the United States and push up the dollar relative to other currencies, making dollar-denominated oil more affordable.
Vikram Mansharamani, a Boston investor who is author of the new book on financial bubbles "Boombustology" and a 2007 director of the U.S.-Pakistan Business Council, said there is much investors need to sift through. "Now we've had the world, in theory, become less risky,'' but "are we worried about the sort of vengeance killings that are going to forthcome from al Qaeda?''
"The reality is al Qaeda's probably continuing to operate the way it did yesterday. However, i think there is a psychological component that comes with a sense of victory, the sense of accomplishment in the U.S." that could be positive for stocks, Mansharamani said.
All in all, Emerson said, between the killing of bin Laden and the "Arab Spring" pro-democracy movements sweeping through the region, "It appears we're in a period of transition. Where we'll come out of that transition is obviously up in the air. In the meantime, I think oil prices are going to wait and see.''
With videographer Christopher D. Garvin