When war breaks out. so goes the Wall Street maxim, stocks go down and commodities go up. Last week the maxim once more proved true. The news from Egypt set off the widest break in the New York Stock Exchange since the President's ileitis attack of June 8. Led by Royal Dutch-Shell. Gulf Oil and other oil companies with large Mideast holdings, the Dow-Jones industrial average dropped 6.62 to 479.85. But when the President pledged "no involvement." the market bounced up again. At week's end the market had more than regained its losses.
When the news of Anglo-French military action hit Chicago's mammoth Board of Trade, a flood of orders overwhelmed the grain pits, turned them into a bedlam as traders bawled bids and offers. Wheat, corn. rye. cotton, soybeans, lard—just about everything except onions—soared on the prospects of war shortages, sent the Dow-Jones Commodity Futures Index up 1.66 points to 165.79 for the largest one-day advance in 2½ months.
Freighter Breakout. The war was not the only reason for action; there was an expectation that even if the Mideast trouble should be settled, large shipments of commodities would be sent into the area by the U.S. The Government had already scheduled a vast surplus-grain program for India, was negotiating a wheat agreement with Israel and talking of shipping food—mostly wheat—to Poland. Hungary, and other rebellious Russian satellites. To transport the vast amount of commodities the Maritime Administration last week released thirty 10,000-ton wartime freighters from its reserve fleet.
But the concern over oil remained. The Middle East had been shipping 2,000,000 bbls. daily to Western Europe, 1,200,000 by tanker through the Suez Canal, the other 800,000 bbls. via pipeline from the Persian Gulf to the Mediterranean, where tankers picked it up. Another 300,000 bbls. daily had been going from the Mideast to the U.S.
Tanker Shortage. If the canal and the pipelines should close down, the West would have to find new sources of oil and tankers to move it. The Western Hemi sphere could step up production an estimated 1,300,000 bbls. to 1,500,000 bbls. without much trouble—enough for all U.S. needs and more than half of West ern Europe's. But tankers are in the shortest supply ever. Sending them around the Cape of Good Hope instead of through the canal would lengthen the Persian Gulf-Rotterdam round trip from 44 to 71 days. Experts estimated that the Suez closing would require the addition of at least 144 tankers just to handle the substitute oil shipments from the Western Hemisphere. The U.S. has 34 in reserve. Last week the U.S. took six of the T25 out of mothballs, put them on sale, ordered another seven made ready. Whatever the U.S. diplomatic position toward anglo-French aggression, the U.S. Maritime Administration was going ahead with plans to release tankers for an oil lift to Western Europe.