City View: The war is as good as won, according to markets.

Byline: Nevill Boyd Maunsell

If the Iraq war was all about oil, the markets were considering it as good as won yesterday.

Brent crude for May delivery fell by more than a dollar a barrel to $25.50, down by 18 per cent from its pre-war peak. That may be worth only two or three pence a litre to British motorists after Chancellor Brown has taken 57p of the price (if you include the VAT on his excise duty), but in the gently taxed US nearly every cent flows straight through to what gasguzzling American drivers have left to spend on otherthings. That may be horrendous ecology, but on this occasion it could make the difference between something not far off a recession and American economy that gathers a second wind sucks the rest of the world in its welcome wake.

Happily this is beneficent turn of events is based on more than a couple of days' encouraging news from the war. It turns out that, for all their public reservations, the Saudis have quietly been backing the US in the way that mattered.

They opened their pumps in earnest back in February.Last month, according to Reuters, their production hit its highest level in 21 years. Other OPEC countries pitched in, too, and the tankers are now completing their Atlantic crossings. Last week America's imports of crude reached an all-time record. Stocks rose twice as fast as expected.

Only a week ago, while the tankers were actually docking, there was jumpy talk about what a mess we would be in if there was a strike in Nigeria while no oil is coming out of Iraq. It was a false alarm. The world is suddenly awash with the blessed stuff. Be thankful.

As ever, though, as one cloud passes another looms.

This time it is the mysterious pneumonia virus known as SARS. Already it is wreaking havoc in Asia on a scale we had been alerted to fear from Saddam Hussein's weapons of biological mass destruction.

Yesterday the Foreign Office confirmed advice from the World Health Organisation urging travellers to avoid Hong Kong and China.

This is drastic stuff. Quite apart from the consequences for tourism and the world's ailing airlines, the South Chinese province of Guangdong, where it seems to have started, is hub of the Chinese manufacturing miracle. Quite what happens if the rest of the world puts it into quarantine is hard to say - though some rival centres of production might benefit.

So far the human devastation doesn't look huge. Some 2,300 people are said to have caught the novel plague and perhaps 80 of them have died. It may be worse because the Chinese authorities have been accused to trying to hush it up.

The dread it inspires - because there is no known treatment and no clear idea of how it spreads - is of an altogether different order of magnitude. Already more than a quarter of the US companies that send buyers overseas are said to have banned travel to anywhere in Asia.

Investment banks are scaling back their growth forecasts for the whole of China as well as Hong Kong.

There's nothing we can do except watch out.

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