Biggest market risk: Middle East turmoil

stock market risksA number of global problems dominate investors' worries, and experts say the market's biggest risk is the escalating political turmoil across the Arab world and the impact on oil prices. By Hibah Yousuf, staff reporter

NEW YORK (CNNMoney) -- No one saw it coming. As champagne corks popped and confetti swirled to usher in 2011, most experts pointed to Europe's ongoing sovereign debt crisis as the market's biggest hurdle this year.

But all that changed in January, when violence and chaos heated up across the Arab world, starting with massive protests that toppled Tunisia's longtime authoritarian leader. It didn't end there: Egypt, Libya, Nigeria and Saudi Arabia are among the hottest spots right now, and not in a good way.

Click the chart to track oil and other commodity prices.

Experts now cite the escalating political turmoil in the Middle East and North Africa, and its impact on oil prices, as the biggest threat to the market, according to an exclusive CNNMoney survey.

The unrest has already triggered a nearly 20% spike in crude prices this year, amid fears that the revolts will spill over into other oil-rich countries and disrupt supplies.

"The liberalization movement has a life of its own, and my main concern is that it will spread and ultimately draw in Saudi Arabia," said Peter Tuz, president at Chase Investment Counsel, who is among the 60% of survey respondents who identify the Middle East situation as the biggest headwind.

Experts worry that that the proliferation could push oil prices back up to the record highs of near $150 a barrel set in 2008. That could derail the economic recovery, and in turn, put a serious crimp into the stock market rally.

"We've already heard some segments of corporate America express concern over profit margins at the current level of oil prices, and another $40 [a barrel] would exacerbate the situation," Tuz said.

Moreover, higher oil prices keep pressure on gasoline prices, which are already up 20% year-to-date at an average of $3.685 a gallon. Higher gas prices will inevitably have a deep impact on consumer spending.

"So far, people have tolerated the spike in gas prices, but discretionary spending really takes a swoon in an environment with gasoline at $4 a gallon," Tuz said.

Aside from the Middle East, experts are still worried about Europe's ongoing sovereign debt crisis.

A handful of respondents, including Fort Pitt Capital Group's senior equity analyst Kim Caughey Forrest, say it's a bigger concern than the problems in the Middle East.

"Banks in Europe hold a large chunk of the sovereign debt, and if sovereign entities default on their loans or come close, banks will have to take a haircut and lend less money to businesses and individuals that need it to grow," she said. "That risks a credit crunch and limits global economic growth."

Even with all those headwinds, there remain optimists, such as National Securities chief market strategist Donald Selkin, who thinks the market has already shown it can weather those risks.

"So far, [the risks] have not done that much to impede the ongoing recovery here," Selkin said. "I'm most concerned about China tightening rates, because if their economy slows down from its projected growth forecast, that could have a ripple effect on other parts of the world."

On Tuesday, China's central bank hiked interest rates for the fourth time in six months in an effort to combat inflation in the country.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.19%4.26%
15 yr fixed3.23%3.27%
5/1 ARM3.34%3.45%
30 yr refi4.17%4.23%
15 yr refi3.21%3.25%
Rate data provided
View rates in your area
Find personalized rates:
Index Last Change % Change
Dow 16,982.59 22.02 0.13%
Nasdaq 4,444.91 -4.65 -0.10%
S&P 500 1,978.91 0.57 0.03%
Treasuries 2.49 0.02 0.89%
Data as of 9:16pm ET
Company Price Change % Change
Apple Inc 99.02 1.35 1.38%
Facebook Inc 74.92 -0.27 -0.36%
Bank of America Corp... 15.50 -0.09 -0.58%
Dollar Tree Inc 54.87 -0.08 -0.15%
Family Dollar Stores... 75.74 15.08 24.86%
Data as of 4:03pm ET


Herbalife shares tumble after the maker of nutritional supplements reports earnings that fall short of analysts' estimates. More

New annual report from U.S. government shows the long-term prognosis for Medicare has improved thanks to slower health spending, while the outlook for Social Security remains unchanged. More

Online dating site OkCupid found its users were more likely to have conversations when it told them they were more compatible than in reality. More

Actor-founded This Bar Saves Lives had Hollywood connections, but learned Start-Up 101 the hard way. More

Steve Mason, a pastor from California, inherited more than $100,000 in student loan debt when his 27-year-old daughter died suddenly in 2009. With interest and late penalties, the debt has since ballooned to $200,000. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.