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Iraqi turmoil felt overseas

Turmoil in Iraq is having major impact overseasSteve Allen Getty Images

As waves of Al Qaeda-backed insurgents sweep through Iraq on Thursday, the economic impact has already been felt across the ocean with rising oil prices and tumbling stocks markets amid growing uncertainty over the region’s stability.

The Dow Jones Industrial Average, the S&P 500 and the Nasdaq each dipped between 0.6% and 0.8% at closing Thursday afternoon. The markets reacted poorly to news of soaring crude oil prices after Kurdish soldiers seized the oil-rich city of Kirkuk in Northern Iraq while the rebel group Islamic State of Iraq and Syria (ISIS) overran several cities on its march toward Baghdad.

Iraq is one of the world’s leading oil exporters and the political turmoil there – 500,000 civilians reportedly fled the city of Mosul after ISIS took control of it – has caused oil futures to spike. The Intercontinental Exchange’s futures contract for Brent crude oil was up 2.9% to $113.20 per barrel while the contract for West Texas Intermediate crude also rose to $106.81 per barrel, up 2.3%. (Fortune reported earlier today that WTI had jumped more than 17% since the beginning of the year.)

As always, any spike in crude oil can affect the average American directly, through increased gas prices, while the transportation industry should also feel the impact along with companies that ship products across long distances.

What’s worse, there does not seem to be any hope of relief on the horizon. The Iraqi government said Thursday it has retaken the city of Tikrit from ISIS, but there was no independent confirmation. Whatever the case, the rebel group still has its eyes on the country’s capital city, and President Barack Obama said Thursday that the U.S. is weighing the possibility of increasing its military presence in Iraq less than three years after he ordered the withdrawal of troops.