Any expectation that the bombing of Libya by U.S., British and French forces would prompt a rush into safer assets has been easily trumped by investors focused on the underlying strength of the world economy.
With the exception of gains in the price of oil and a bit of gold action, markets on Monday paid scant attention to the military intervention, instead buying riskier assets such as stocks.
Put bluntly, investors are primarily driven by the long-term growth prospects for the global economy and while there are many risks to this at the moment, they are still on the margins.
Libya — with disruption to its 2 percent of world oil output already priced in — does not matter from that perspective as things stand.
"The events in Libya ... do not jeopardize the global economic outlook," Berenberg private bank told its clients.
Japan, comprising 6 percent of the world economy, is a different matter, of course. But even here, the underlying issue for investors is the impact of Japan's triple disasters on global growth.
Hence, their spirits were lifted on Monday by indications that the nuclear meltdown threat was easing and by estimates from the World Bank that a temporary Japanese slowdown would have only a modest short-term impact on the nearby region.
"There will be a major hit to wealth, but hasn't that been priced in already?" said Andrew Milligan, head of global strategy at Standard Life Investments.
The Nikkei average fell close to 20 percent in the days following the earthquake, before recovering somewhat, prompting some investors to say there had been too great a reaction.
"Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world," billionaire investor Warren Buffett said. "I don't think Japan will be an exception."
None of this is to say that Libya and Japan do not present risks to investors.
Japan's nuclear crisis, for example, is not over and could yet become more serious for the country's people and economy.
There are also major unanswered questions about the extent to which the disaster will stop Japanese overseas investment. The country is a major driver of mergers and acquisitions, for example, as well as foreign direct investment.
In Libya, a prolonged military campaign could build concern. More directly, it remains part of a broader pattern of revolt across the Arab world that has pushed the price of oil into territory where some economists worry about its impact on growth- and profit-dampening inflation.
Brent crude was above $115 a barrel on Monday as the intervention in Libya heated up. But this was well short of its recent peak just shy of $120.
It was also a recovery from losses experienced after the Japanese earthquake and tsunami when traders sold on the initial expectations — now somewhat reassessed — that the disasters could seriously hurt global growth.
The recovery, though, would be categorized as a "healthy" demand-driven price rise as opposed to a more negative supply-driven one.
The biggest concern for investors is if the turmoil spreads seriously to the core oil producers, notably Saudi Arabia, or if the crackdown on mainly Shiite protesters in Bahrain prompts more tangible outrage from Iran.
Moving Along Nicely
Even then, it would be the impact on the global economy from higher oil prices due to short- or long-term supply disruptions that would cause investors to rush to safer assets.
And a lot would depend how quickly it spiked, how long it held there and what the impact on consumer confidence was.
"Simulations at $200 a barrel send Western economies into recession and at $150 barrel growth is somewhat weaker but recession can be avoided," said Sarah Hewin, senior economist at Standard Chartered Bank.
This is a long way off. So for now, the reason that investors seem calm about Libya and less anxious about Japan is that the global economy is doing well.
The International Monetary Fund projects that global growth will be in the region of 4.4 percent this year, well above average for the past 20 years.
Even a worst case scenario for Japan and a big spike in oil would not cut this too much. And JPMorgan economists estimate that growth may be even higher than the IMF suggests.
Global manufacturing surveys, they calculate, imply growth of more than 5 percent.
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