Even as the sharp rhetoric of the last election cycle fades into history, America's struggle in Iraq rolls on. While battles there command the public's attention, an indirect effect of the war burdens Americans' pocketbooks. The price of oil remains stubbornly high in part because of uncertainty about supplies from the Middle East. The oil premium is rippling through the U.S. economy, hitting companies and consumers alike.
Elsewhere in the world, another conflict threatens to create disruption in the flow of a different commodity. Violence has intensified in the Ivory Coast in recent days as Ivorians have begun attacking foreigners in that country. Ivory Coast has been unstable for the past couple years, divided between the rebel-controlled north and government-held south.
At first glance, this crisis half a world away, while unfortunate, might seem fairly inconsequential to most Americans. However, the Ivory Coast is the world's largest producer of cocoa, and the current unrest happens to be occurring right in the middle of the cocoa-growing season. According to Reuters, the price of cocoa for December delivery rose 12% today in London as traders fretted about exports from the Ivory Coast.
For the world's leading chocolate companies, including Hershey (NYSE:HSY), Nestle (Pink Sheets: NSRGY), and Cadbury Schweppes (NYSE:CSG), the Ivory Coast's problems are very relevant. If the situation worsens, it seems likely that their earnings could take a hit. Of course, they wouldn't be alone in feeling some pain. Kraft (NYSE:KFT), Kellogg (NYSE:K), General Mills (NYSE:GIS), and any food company that uses chocolate would feel margin pressure.
The case of the Ivory Coast demonstrates how the global economy operates under a new type of domino effect. For investors, that means it pays to keep track of events around the world.
Fool contributor Brian Gorman is a freelance writer living in Chicago. He does not own shares of any companies mentioned here.
