Photo: BK Bangash/AP

The global impact of benazir bhutto's assassination should not be underestimated. All of this has to be seen in context. Oil prices have now soared edging closer to $100 a barrel, equity prices are falling and the concept of "geopolitical risk" has re-emerged during a relatively quiet time. All that on top of deteriorating economic news in the United States with retail sales sluggish and housing markets plummeting, something I covered in my blog entry yesterday.

So where does it go from here?

First, the assassination fueled concerns about regional instability, sending US and global stocks lower. Don't expect a quick recovery.

Standard & Poor's warns that Pakistan's credit rating might be lowered because of the likely political instability and Moody's Investors Service also has a negative outlook on Pakistan's credit rating. "Unless political stability is restored, the country's fiscal position, balance of payments and external balance of payments may be undermined. The negative outlook underscores the degree of political uncertainty. Unless stability is restored, chances are that uncertainty will increase, '' Moody's credit analyst Thomas Byrne told Bloomberg.

It's also likely to affect business relations between the US and Pakistan. US corporations have poured billions of dollars into Pakistan in recent years because it is seen as a low-cost manufacturing base. Between 2001 and 2006, US investment in Pakistan has doubled and all this would be affected by prolonged violence."The real question right now is whether the supply chain will remain intact. Right now, we don't know. The key variable is the cohesiveness of the Pakistani Army," George Friedman, chief executive of global intelligence firm Stratfor told the International Herald Tribune.

Radical Pakistani commentator Tariq Ali says it was a mix of military despotism and anarchy that killed Bhutto. "In the past, military rule was designed to preserve order - and did so for a few years. No longer. Today it creates disorder and promotes lawlessness. How else can one explain the sacking of the chief justice and eight other judges of the country's supreme court for attempting to hold the government's intelligence agencies and the police accountable to courts of law?...It is assumed that the killers were jihadi fanatics. This may well be true, but were they acting on their own?"

The US might have a role bringing Pakistan's house to order. But given his track record, US President Bush is more likely to focus on the extremists in Pakistan than on fixing up the Pakistani military. Be prepared for a period of bad policy.