What's Spooking the Market

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For a while this week, it seemed as though the stock market was willing to discount the war in Lebanon based on good news from the Fed. Wednesday, the Dow rallied by 200 points. But that mood soon changed and the market has been heading lower ever since. Why?

Because the war in Lebanon is about much more than Lebanon. The market realized that what's happening in Lebanon is just a part of the larger War on Terror. It's another demonstration of how difficult it is to cope with individuals who are willing to destroy everything around them in order to achieve their objectives. We saw it on 9/11. We see it in Lebanon. And we still see it in Iraq.

While eyes were focused on Lebanon, many missed news from Iraq that the last two months have been the bloodiest two-month period since Saddam Hussein was kicked out of power. Islamic terrorists have murdered 6,000 Iraqi civilians since mid May. And it’s not just the numbers that are so horrifying. It’s the quality of the killings. The latest outrage in Iraq, reported this week by National Public Radio, was when terrorists severed the head of a girl they’d kidnapped, stuffed the head with explosives and called the girl’s father to pick it up. He, too, was killed.

The residue of such horrific brutality, used to leave a kind of moral stain on humanity. But now there’s little more than a shrug, and not even that from the one collective that might have some kind of influence on these terrorist monsters: The Muslim media, most Muslim governments and Muslim religious leaders. The web site of the Council on American-Islamic Relations (CAIR), for example, is loaded with stories about Israeli bombs killing civilians in Lebanon, and about alleged U.S. abuses against Muslims. But there is not one word condemning Islamic terrorists for slaughtering 6,000 innocent Muslims in Iraq in just two months. (In fairness to CAIR, they have in the past condemned abuses by Muslim extremists, though nowhere near as often as their condemnations of alleged Israeli and U.S. abuses of Muslims). If the greater Muslim world will not unite with wholesale condemnation of brutality by Muslim extremists against their own, how then could we possibly expect any sympathy when Islamic terrorists kill and threaten non-Muslims?

With this as a background, what hope is there of a peaceful resolution of the conflict in Lebanon? The Israelis seem to have come to the conclusion that there is no hope of a peaceful resolution with Hezbollah. Israel's Ambassador to the United Nations spelled out his country’s objective earlier this week: to completely destroy Hezbollah, and not to stop until they've done so. Question: How much of Lebanon is Israel willing to destroy to achieve its objective? Will the world stand by and allow Israel to destroy the infrastructure that supports up to 40 percent of the population? And if not, will Hezbollah (and Iran) emerge from this war with far more influence than it had before?

I realize that I just posed a bunch of unanswerable questions. But that’s really the point. The more the market looks at this war, the more it realizes that its conclusion is far from certain. And the market hates uncertainty.

Hezbollah, Hamas, Al Qaeda and all the other Islamic terrorists, funded and directed by Iran and abetted by Syria, are evil partners in an evil war plan. And if you're evil enough not to care at all about casualties on your side to win a war, you can create tremendous damage with unforeseeable consequences. That will destroy value in a market far more than another interest rate rise by the Fed. And that's what's beginning to really spook the market.

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David Asman is the host of "Forbes on FOX" which airs on the FOX News Channel, Saturdays at 11 a.m. ET.