NEW YORK (CNN/Money) -
Whiplash ... that's what the markets are suffering so far today in the wake of the attacks in London.
That's because traders seem to be concluding that the main impact of the blasts that ripped through subways and buses in London is human, emotional, psychological -- not economic, not financial.
Look at what happened to crude oil futures. The price was trading over $62 a barrel in the overnight market. When news of the attacks hit, the price plummeted down to just over $54! The knee jerk reaction was that a big terrorist attack could hit the global economy hard just like the 9/11 attacks hit the U.S. economy nearly four years ago.
But oil reversed and is back over $60 a barrel as the thinking spreads throughout all the markets that the impact of the attacks will be short lived and will not have a lasting impact -- as long as they are not followed up with more of the same.
"Barring any more blasts this becomes a buying opportunity for stocks," according to Scott Fulman of Investec (US) Inc. As stock prices fall, he said, "valuations get more attractive."
"There is usually a bounce in stocks after these kinds of things and I think we are already starting to see it now."
Traders are already comparing the London events not to the September 11, 2001 attacks in New York City but to the Madrid train bombing. Stocks tumbled after the train blast on March 11 of last year but within a week they had recovered all their losses .
Bottom line, if it isn't going to derail the U.S. economy then it isn't expected to have a lasting impact on U.S. interest rates or the U.S. dollar.
"Markets can be myopic and unless it's happening here it's like it doesn't matter," noted Carlos Borromeo of Stephens Inc. He said the bond market's main focus has already turned to tomorrow's June employment report which is expected to show a pretty healthy gain in new jobs after a very anemic rise in May.
Is this cold, calculating, pragmatic investor reaction? A wise conclusion that the U.S. consumer is much more threatened by high oil prices than terror attacks overseas? Or do we have our heads in the sand, are we in denial of what is going on in the world, and what still represents a threat to the domestic economy?
People aren't thinking about "a suicide bomber in a mall, what that does to retail sales," Borromeo said. "People don't think of (terrorists) as a worldwide contagion."
David Edwards of Heron Capital Management said the impact of events like those that occurred in London are fleeting because with each successive attack investors like him have "programmed this into their risk models."
In fact, Edwards says his firm has increased the amount of U.S. government bonds it holds "because we know that when something bad like this happens people will buy 10-year Treasuries." Nor has his company owned travel-related stocks since 9/11 because when terror attacks take place "we know they are going to dump airline stocks."
"People in my position have to look at world as it is," Edwards says. "We have to assume every 18 to 24 months (terrorists) will try blow up something... (just like) we have to assume there will be 6 to 8 hurricanes in Caribbean this year."
-- Kathleen Hays is economics correspondent for CNN and contributes to Lou Dobbs Tonight. You can read more of her columns here.