Will Al Qaeda's Legion of Doom Destroy America's Economy?

Surgically implanted bombs, the most serious threats the U.S. has seen in years, and Al-Qaeda "chatter" similar to what was seen right before 9/11 are just some of the threats U.S lawmakers say prompted increased security, and the closure of embassies across the Middle East, recently.

The U.S. State Department also issued a global travel warning, saying that terrorist organizations are aggressively focusing on kidnapping, torturing, and bombing Americans traveling abroad. Moreover, this all has the ability to affect America's shaky economy. But there are ways to prepare -- just in case.

Image: CIA, via Wikimedia Commons. 

The increase in terrorist activity
In the past few weeks, the U.S. closed 22 U.S. embassies across the Middle East and North Africa, because of "credible threats" that terrorist organizations are planning a massive attack. So far, U.S. intelligence agencies haven't stated where, or when, these attacks will take place, but they did say the threats appeared to originate in Yemen, indicating a high probability they're Al-Qaeda-related.

Further, the ranking Democrat on the House Intelligence Committee, Rep. Dutch Ruppersberger of Maryland, told ABC that Al-Qaeda's "operatives are in place" and that it'd be a "major attack." And Rep. Peter King, R-N.Y., the lead on the House Homeland Security subcommittee on counterterrorism and intelligence, told ABC that "Al Qaeda is in many ways stronger than it was before 9/11, because it's mutated and it spread and it can come at us from different directions."

What to prepare for
Luckily, lawmakers are taking these threats seriously. But, considering that on Sept. 10, 2001, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) closed at 9,605.51, and on Sept. 17, the day the Dow reopened, it closed at 8,920.70, a 7.13% decrease -- and then it didn't recover for a month -- there are a few things investors should keep in mind. 

First ...
A terrorist attack, particularly a massive one, could have an emotional impact on the market. The Dow dropped 7.13% on Sept. 17, but it finished the week down 14.3% -- the largest single-week drop in U.S. history. This drop was probably exacerbated by the attack's occurrence at the heart of the U.S. financial system, though leading reports indicate that location wasn't solely responsible for this decline. In addition, while initial reports indicated that the Sept. 11 attacks slowed GDP, later Congressional Research service reports state that GDP slowed before Sept. 11, and was not a result of the terrorist attack. This finding indicates that the sudden decrease in the market was largely emotionally driven. Consequently, a short-term drop in the market is possible following a major attack.

Second ...
A surge in oil prices is probable. One of the reasons the U.S. closed embassies in the Middle East and North Africa is that these areas are likely spots for terrorist attacks; particularly the Arabian Peninsula. That directly affects the Organization of Petroleum Exporting Countries, or OPEC.

In 2012, petroleum net imports accounted for 40% of the total petroleum used in the United States. Of that amount, 55% was imported from OPEC, which includes Middle Eastern countries such as Iraq, Libya, and Saudi Arabia. In fact, in 2012, 18% of U.S. imported petroleum came from Saudi Arabia.

Further, in July, OPEC crude output hit a four-month low because of the conflict in Libya and Iraq and had a direct effect on July's gas prices. According to AAA, July gas prices rose $0.14 per gallon because of increased demand and unrest in the Middle East. Oil price increases are usually good for ETFs such as the United States Oil Fund (NYSEMKT: USO  ) , and PowerShares DB Oil Fund (NYSEMKT: DBO  ) , but a rise in oil prices can also be detrimental to the economy.  

Recently, The World Bank Development Research Group Environment and Energy Team analyzed a wide body of research on oil prices' impact on the economy. They concluded that an increase in oil price negatively affects global GDP but is especially damaging to emerging and developing countries, such as China, because of their reliance on oil-intensive manufacturing industries. Consequently, a rise in oil prices, following an attack, could negatively affect the United States' slowly recovering economy -- and the global economy.

Third ...
As Secretary of State John Kerry said, "Deploying diplomats today is much cheaper than deploying troops tomorrow." The Middle East is a hotbed for terrorist activity, and one way America fosters diplomacy is through its embassies. Consequently, they make ideal targets for terrorist attacks. However, a physical assault on an embassy isn't the most effective way a terrorist group could attack the United States. And I think they know that.

In 2009, under the direction of Al-Qaeda, Umar Farouk Abdulmutallab, the "underwear bomber," tried to blow up a flight headed to Detroit. Following the failed attack, the U.S. deployed L-3 Communications Holdings' body scanners that had a three-year initial estimated cost of $3 billion (since reduced). 

Last September, the Izz ad-Din al-Qassam Cyber Fighters successfully targeted six banks, including Bank of America and JPMorgan Chase. This attack, along with others, spurred the U.S. to invest heavily in cybersecurity initiatives such as the Department of Defense Cyber Crime Center -- which partners with Lockheed Martin (NYSE: LMT  ) and its subcontractor CACI international (NYSE: CACI  ) . In fact, analysts expect that while defense budgets are cut, cybersecurity-related spending will  increase. 

Pre-9/11, the Congressional Budget Office stated: "Under current policies, total surpluses would accumulate to an estimated $2 trillion over the next five years and $5.6 trillion over the coming decade. Such large surpluses would be sufficient by 2006 to pay off all debt held by the public that will be available for redemption." Then 9/11 happened.  

America is a defense superpower, and Al-Qaeda doesn't stand a chance in a frontal attack. But through their past actions, they've cost the U.S. trillions. Fortunately, or not so fortunately depending on how you look at it, the U.S. has already invested heavily in counterterrorism measures, so a sharp increase in defense spending is unlikely. Still, an attack by Al-Qaeda on the U.S. is likely to spur defense spending -- even if we are in the middle of sequestration. Just look at what happened following North Korea's missile launch: Defense Secretary Chuck Hagel stated that the U.S. would be shifting "resources" to boost funding to Lockheed Martin's Aegis missile defense system, and beefing up missile defense -- to the tune of $1 billion.  

A grim wrap
The Department of State believes that now to the end of August is when the terrorists plan to attack. But the good news is that for now, this is all still hypothetical -- and hopefully it remains that way. But if a "major attack" does occur, the best thing you can do as a Foolish investor is to look at what's happened in the past, and not panic. The market may go nuts, oil prices could increase, and it could have an overall impact on the economy, but I don't think it'll be long-lived. And as Fools invest for the long run, the best thing you can do is stock up while the market's low.

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Read/Post Comments (14) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 10, 2013, at 4:19 PM, mightythor47 wrote:

    Let's make it clear that most of the damage to the US economy spelled out in the article was and continues to be self-inflicted. Osama didn't close the stock market or sell off any stocks. We did that. Al Qaeda didn't close any embassies. We did that. It is interesting that the news of the past week has been full of US reactions to the threat of terror, but not a single actual terrorist act has been reported. I like to compare the economic effect of terrorism to anaphylactic shock, our body's potentially fatal over-reaction to allergens -- most of which are otherwise harmless.

  • Report this Comment On August 11, 2013, at 8:11 AM, EricMJohnson wrote:

    The terrorist threat is insignificant when a person looks at if from a larger perspective. Sure, there are a few extremist radicals who will attack individual targets, but it isn't an entire nation with massive resources capable of invading us or destroying our economic infrastructure. The REAL economic harm is from our massive military-industrial complex that drains a significant portion of our productive capacity to fight perhaps a few thousand extremists scattered around the middle east. We created this problem with our foreign policy meddling for the last 50+ years. But if you are a keen investor, you will put your money in our military sector, and profit from perpetual war. Common wisdom says that World War II brought us out from the Great Depression; so our economic policy since then has been to engage in perpetual war. We haven't had a Great Depression since then, so it must be working according to our nation's leaders.

  • Report this Comment On August 11, 2013, at 8:31 AM, jolin69 wrote:

    First off Katie, you are a fool contributor, where does the media get off giving these lowlife, dirtbags a name like Legion of Doom. Does anyone realize they have people that read this CRAP, and all the media does is build up their egos.All they are is RUTHLESS THUGS that have nothing better to do than hate the world. As far as Al-Qaeda ruining the economy, thats false, especially with oil. All that is the GREEDY petroleum companies that blame so- called

    world events just to raise the price of oil. Americans see very little of Libyan oil, or oil from Iraq, but yet all it takes again is the media to turn up the banter, and here we go, the price of oil goes up.Maybe the media should give THEM a new name, The Legion of DOPES.

  • Report this Comment On August 11, 2013, at 8:56 AM, junktex wrote:

    Yeah I guess we're gonna need another large scale false flag event to get the sheeple behind a nother war.

  • Report this Comment On August 11, 2013, at 8:58 AM, jazz82 wrote:

    Americans are too soft to stop terrorist.

    They kill civilians any way they can and we cannot return the favor. I bet if we were to kill innocent muslims each time they kill Americans it would have an affect, but of course we are too human to return the terror on their people.

  • Report this Comment On August 11, 2013, at 9:10 AM, csymonds wrote:

    We do have a problem with threat's from other countries. It's because we have a president that say's you will do what I say of suffer the consequences. Was there threat's to shut down 10 embassies in Arabic nations. Was it because the president of Syria wouldn't release the Muslim brotherhood like Obama wanted. There are a lot of question going on out there about this. Why is the president on vacation if these threat's exist because HE DON'T CARE. This could be another one of his made up stories to take the focus off of his administration for violating the CONSTITUTION and the death's in Benghazi. This administration is so full of lies and misconceptions that it is ridicules.

  • Report this Comment On August 11, 2013, at 9:38 AM, BizaaroLand wrote:

    ''Will Al Qaeda's Legion of Doom Destroy America's Economy?''

    Doubtful, although the U.S. military industrial destruction complex wants you to think so. (when your largest national industry is bombs, ordinance, and weapons of mass destruction, there is going to be War, lots and lots of wars. And as for us little people going along with it?

    Fear. Its all about the Fear.

  • Report this Comment On August 11, 2013, at 10:03 AM, JePonce wrote:

    If the Al Qaeda's Legion of Doom is Obamanoics, the answer is, "most definitely."

    With a National Taxpayer Debt of $17 trillion, and another $70 trillion in unfunded federal liabilities for Social Security, Medicare, and federal employee pensions and health care benefits, how can we not fail?

    According to the Obama White House Budget, Obama projects our national debt to be in excess of $20 trillion by the end of his current term. Obama and his 111 through 114 Congresses will have contributed more to the National Taxpayer Debt than the combined contribution of all 43 prior presidents, and Congresses 1 through 110.

    Check out the Obamanomic microcosms, Detroit, Stockton, Chicago....etc, etc, and etc.

  • Report this Comment On August 11, 2013, at 10:25 AM, Namath13 wrote:

    All Congress needs to do is cut off the funding for Al CIAeda, and they will dry up and blow away like an old weed!!

    Do any of you out there really believe any of this terror BS is real?

    If you do you will deserve the NSA, TSA, road checks and all the other police state BS that is on its way!!!

    All this False Flag stuff is being used to justify taking your individual freedom/Constitutional rights....sad, but true!!!

  • Report this Comment On August 11, 2013, at 10:58 AM, junktex wrote:

    I agree with Namath.The poiticians,federal reserve and the banksters have destroyed our economy.We created al Qaeda too.

  • Report this Comment On August 11, 2013, at 11:37 AM, michaell357 wrote:

    Why should Al Qaeda try to destroy America's economy? The Republicans are doing a good job by themselves.

  • Report this Comment On August 11, 2013, at 2:54 PM, comosichiam wrote:

    WE SHOULD BE PROJECTING A SCENARIO OF IMPENDING DEATH TO ANY COUNTRY HARBORING ANY TERRORISTS WHO DARE TO ATTACK THIS COUNTRY. GET THE BUFFOON TO GO ON TV AND ANNOUNCE TO THE WORLD THAT WE WILL SEND BALLISTIC MISSLES TO ANYONE OF THE COUNTRIES THAT PROTECT TERRORISTS THAT WILL GET THEIR FRIKKIN ATTENTION.

  • Report this Comment On August 11, 2013, at 3:56 PM, BigPanda60 wrote:

    Too late! Obama and his Legends of Idiocracy have beaten them to it.

  • Report this Comment On August 11, 2013, at 6:33 PM, sagehopper wrote:

    They tried that on 911. It didn't work. Economically is what they are doing now..and we have a Muslim president that is their front man. He is trying to destroy our economy by making us servants to the oil producers..

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