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Storytelling In The News: #97

Gaza City killing jolts world's stock markets

March 23, 2004

Can a butterfly flapping its wings cause a tornado that affects the whole planet? The storytelling equivalent of that phenomenon was evident yesterday, as Israel's killing of a single individual in Gaza City -- a 67 year-old wheelchair-bound quadriplegic who is almost deaf -- caused a global tornado of storytelling, which in turn caused financial markets to fall sharply around the world.

In rational economic terms, the killing of Ahmed Yassin, the spiritual leader of Hamas, had little to do with the world economy. In the Middle East, individuals are killed every day and the world sees in them no particular significance. But the tornado of storytelling that this particular killing unleashed caused massive political and financial reverberations. The storytelling sparked by the incident sent Wall Street and European exchanges to new lows for the year.

The different stories of the killing

For Israel, the story was clear: the killing was justified. Ariel Sharon, Israeli prime minister, defended the killing of the head of the Islamic movement, describing him as an arch-terrorist who plotted attacks that killed hundreds of Israelis.

Palestinians were telling a very different set of stories. The wheelchair-bound Yassin was struck by missiles fired from an Israeli air force helicopter as his wheelchair was being pushed out of a Gaza City mosque after dawn prayers. As news of the assassination spread through the Gaza Strip, tens of thousands streamed into the streets. Witnesses said Yassin's funeral procession was the largest demonstration of support for a Palestinian leader since Yassir Arafat returned to Gaza from exile in 1994. Hamas said: "Ariel Sharon has opened the gates of hell and nothing will stop us from cutting off his head."

Unlike past targets whom Israel accused of planning terror attacks themselves, the 67-year-old Mr. Yassin was a cleric viewed in the wider Muslim world as more a spiritual leader to Hamas than a hands-on plotter of terror attacks. The impact of his assassination for Palestinians was as though for Westerners somebody had assassinated the Pope.

Palestinian rage was reinforced by many foreign leaders, who denounced the killing as illegal and likely to undermine peace efforts in the Middle East. In a joint statement, European Union foreign ministers said: "Not only are extra-judicial killings contrary to international law, they undermine the concept of the rule of law which is a key element in the fight against terrorism." Jack Straw, UK foreign minister, said: "It's unacceptable, it's unjustified and it's very unlikely to achieve its objective."

Absent from the chorus of condemnation was the US. The White House said it was "deeply troubled" by events in Gaza but Condoleezza Rice, national security adviser, and other senior officials also emphasized that they believed the Hamas leader had been heavily involved in terrorism. The US appealed for calm and insisted it was given no advance warning of the operation.

Political reverberations of the story

By killing Sheik Ahmed Yassin, the spiritual leader of the militant Palestinian group Hamas, Israel signaled that it is increasingly committed to defining a new Palestinian state on its own terms.

The Wall Street Journal noted that such a unilateral course by the Israelis could launch the longstanding and increasingly bitter conflict on a new path, possibly complicating many U.S. aspirations abroad. Those aspirations include creating a democratic government in Iraq, patching up relations with allies in Europe, and enlisting Pakistani and Saudi Arabian cooperation in fighting terrorists linked to al Qaeda.

The killing of Mr. Yassin also threatens to sow more animosity toward the U.S. itself, which to many around the world is seen as Israel's financial and military sponsor. Yesterday, Hamas issued a rare threat blaming American backing of Israel for the killing.

The killing of Mr. Yassin comes 10 days after Islamist militants bombed Spain's rail network. Israeli officials have long argued that their policy of assassinating Hamas leaders and others attacking Israel is part of the war on terrorism the U.S. and European nations are fighting against al Qaeda. But many European countries have drawn a sharp distinction between the two, treating the Middle East conflict fundamentally as a territorial dispute that should be resolved through a mutually agreed-upon solution.

Financial reverberations of the story

As protests erupted across the Arab world, concerns grew in financial markets that the killing of Mr. Yassin would be used by extremists to spur future terrorist attacks against Israel, the U.S. and other Western targets. In its statement holding U.S. support for Israel responsible for the killing, Hamas invited "all Muslims of the world ... to join in on the retaliation for this crime."

Yesterday, the Dow fell 1.2 percent, to 10,064. The Dow, a gauge of 30 dollar-weighted blue-chip stocks, flirted with the 10,000 mark around 2 p.m. before rebounding slightly. Many traders can be expected to view a Dow close below 10,000 as a significant psychological breach, although a half-century of research shows that technical signposts like the 10,000 mark are essentially useless in forecasting stock price movements.

News of the killing stoked fears in financial markets of an upsurge in militant actions from other Islamic groups. "People are fearing possible attacks here in the States," said one trader.

Thus long before any actual terrorist attacks on the US as a result of the killing, stories about possible attacks cause investors to become more cautious as they imagine the likely impact that any such attacks might have on an economy -- drop in confidence, halt to tourism, cutbacks in travel, increase in insurance premiums and so on. The impact of the fear-inspiring stories is proportionately greater because the economy is viewed as already very fragile, having generated very few jobs despite a supposed end to the recession two years earlier.

Bottom line

Thus in physical terms, nothing in the world economy has shifted because of the killing. However the blizzard of storytelling that the killing has initiated is enough by itself to cause global financial markets to spiral downwards.

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