The idea that the oil market is reacting to the perceived state of the war in Iraq has been very well covered by Dafydd at Captain's Quarters. The conventional wisdom that markets are the most effective means of collecting data of supply and demand. If the market is being driven by the war, then the market is in some way failing.
Dafydd's point is that the gatekeepers of the Mainstream Media are distorting the flow of information. Warzones are historically difficult places to get information from, but the Coalition, in this instance, is remarkably open in the setbacks and casualties taken. I don't think that anyone can honestly say that the reporters are getting out in the field and seeing these casualties happen, so most of the word has to be coming from public information officers and official releases.
So the market fails in direct relation to the failure of media failure. This is another instance of gatekeepers causing collateral damage in pursuing side interests rather than focusing on their primary function. If anything, it is the blogosphere and other distributed information outlets that are going to enhance the markets by providing accurate information.
Objection: What makes blogs any more accurate? Because there is no natural chokepoint or monopoly in the 'sphere. Each blog has to compete for eyeballs, and it would take very little for a site to get a reputation of being full of it. (I'm not there, I hope) Blogosphere, the market of memes.
Nothing new, just another application of the information/market identity. By the way, anyone interested in going in on shorting the market in the next couple of months? I'd guess that the price should be coming down the day the Iraqi Constitution is signed.