How to Profit from a Gaddafi Defeat

 @ibtimes
on August 22 2011 7:04 AM
Libya: Fall of Tripoli
Members of the Libyan community in Tunisia gather outside the Libyan Embassy in Tunis August 22, 2011 to celebrate the entry of rebel fighters into Tripoli. Jubilant rebel fighters streamed into the heart of Tripoli as Muammar Gaddafi's forces collapsed and crowds took to the streets to celebrate, tearing down posters of the Libyan leader. Reuters

Oil prices were falling on Monday as news broke that Rebel fighters were pouring into the Libyan capital of Tripoli in what seemed to be a final push to oust long time Libyan dictator Colonel Muammar Gaddafi.

The market seems to be anticipating that Muammar Gaddafi's rule will soon come to an end and that Libyan oil production will return to the levels they were at before the civil war began.

However, it's still unknown how much damage has been done to Libyan oil facilities or how soon the country will be considered safe enough for foreign workers to return to their jobs.

Although Muammar Gaddafi has vowed to fight on, rebels met little resistance after entering Tripoli and they have reportedly captured Gaddafi's sons Saif Al-Islam and Mohammed.

Investors who feel that the fall of despots like Libya's Muammar Gaddafi will lead to greater stability in the Middle East and North Africa may want to consider the SPDR S&P Emerging Middle East & Africa (NYSE: GAF) and the WisdomTree Middle East Dividend (Nasdaq: GULF) ETFs.

Although the region's stock markets aren't popular with Western investors, that could change if the so-called Arab Spring leads to greater political and economic stability.

The PowerShares DB Crude Oil Double Short ETN (NYSE: DTO) or the United States Short Oil Fund (NYSE: DNO) could also see their share prices climb higher if tensions ease in the oil producing states and causes oil prices to fall.

However, even if the current group of dictators are forced out there's no guarantee that what follows will be an improvement.

One only needs to look to Iraq for just one example of how badly things can go after a long term dictator is forced from power.

There's also the fear that followers of a radical version of Islam could come to power and lead to a form of government like the one in Iran.

If the Arab Spring actually leads to governments that are even worse than their predecessors, the hoped for stability in the Middle East may never come to be.

If this is the case, oil prices could climb even higher, pushing up the share prices of ETFs like the United States Oil Fund (NYSE: USO) and the United States Brent Oil Fund (NYSE: BNO).

This article was originally published on Benzinga, and is republished here with permission. More ETF Stories Twelve Oil & Gas Plays Worth a Look NowHow to Profit from a Gaddafi DefeatGold Rallies to New Record High as Citigroup Raises Price Outlook

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