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Global Markets End Volatile Week Lower As Investors Struggle To Understand Omicron Implications

The new variant of Covid-19 Omicron has once again rattled the global markets and promoted the governments throughout the world to impose travel and workplace restrictions. After first detected in South Africa, Omicron is reported to be more contagious than the Delta variant discovered earlier this year. The new variant is raising the fear of disrupting the supply chain and lowering demand that could significantly stifle the recovery of an already depressed global economy caused by COVD19’s initial breakout.

Omicron Impact on the Oil Market

The Omicron uncertainty has reflected on several markets including, crude oil, stocks, and even cryptocurrencies. The WTI crude oil dropped nearly $10 on 26 November. It was the biggest decline in a single day for the first time since March 2020. Leading to the decline in December, the WTI made a low of $62.43 and ended the last week at $66.38. The question of whether the small recovery towards the end of the last week will continue largely depends on how the Omicron situation progresses in the coming days. So far the OPEC seems optimistic and has raised the quotas by 400,000 barrels per day as planned.

WTI CRUDE OI:  A Sharp Decline of $10 on 26 NOV


Omicron Impact on the Stock Markets and Travel Industry

The global stock markets remained all over following Omicron’s discovery. Towards the end of November, the markets crashed and then regained some of the lost ground but fell again and ended the month on the lower side. The trend is continuing in December with NASDAQ closing 1.92% lower at 15682 last Friday. The S&P 500 slid 1.9% to end the last week at 4534. Meanwhile, the European markets also moved lower on Friday with UK’s FTSE 100 dropping 0.10% while Germany’s DAX and France’s CAC 40 slid 0.61% and 0.44% respectively. A similar trend is continuing throughout the Asian markets.

The Omicron has especially darkened the positive side of the travel sector which is already hit hard during the past two years. The stock price of American Express Company (AXP) that also offers travel-related services along with its payment processing products dropped 12.3% in November. The AXP closed 0.53% lower at $155.94 on Friday and is likely to remain under pressure until the Omicron worries loom over the horizon.

American Express Company – Decline following the Omicron discovery


Several countries including the US, UK, Japan, and Israel have placed travel restrictions to contain the Omicron variant. This has caused the Arca Airline Index that tracks the performance of major airlines to drop more than 10% in less than a month. The restrictions may limit business travel, shopping trips, and tour guides. This will round up to fewer hotel and resort bookings, lower casino revenues that are yet to return to reach pre-pandemic levels in many countries. As of now, the Omicron variant continues to overshadow the travel industry’s plans for a comeback and it is likely to remain under pressure in the new year.

A steep decline in the Arca Airline Index highlighted with an Arch


It’s worth noting here that despite the concerns, analysts still believe the impact of the new variant will remain limited. This is because the world is now better prepared compared to the initial breakout of COVD19 in Dec 2019, and increasing population are getting vaccinated. Having said all that, there will definitely be some economic impact and the full severity of it will only be measured in the coming days.