Whenever there are troubles in the Arab world, the West frets that oil prices will surge and markets will plummet. But as demonstrations in Cairo, Egypt, turned violent on Wednesday and supporters of President Hosni Mubarak clashed with anti-government protestors, no major shockwaves have been felt in the United States yet.

So far, the price of oil has shown no sign of skyrocketing. Crude prices remained essentially flat on Wednesday, rising nine cents to US$90.86 per barrel at the close of trading.

While oil is trading at the highest level in three years, prices had been gradually inching up before the Egyptian crisis erupted, and analysts pointed out that Egypt accounts for only a small percentage of world output. If the country's supply is chocked, it is unlikely to shock the system.

At the same time, the Dow Jones Industrial Average on Wednesday surged ahead, closing over 12,000 for the second day in a row. The previous day, the market crossed the 12,000 mark for the first time since 2008 -- on the assumption that Egypt's problems will be settled peacefully, analysts said.

Still, analysts' main fear is that if unrest spreads to neighboring countries, the turmoil could create a ripple effect overseas and impact oil prices and US markets. In the worst case scenario, it could trigger a second recession in the United States, some economists said.

Demonstrations in Egypt broke out after similar protests in neighboring Tunisia, and observers are wondering if and how far the protests will spread.

"We really don't know how this will develop. If you have a nightmare scenario, you could have a substantial market downturn," said Douglas Elliott, former investment banker and fellow at the Brookings Institution. "But it could also work out very well. We just don't know."

Francisco Torralba, economist at Ibbotson Associates, a Morningstar Company, said if upheaval spreads to major oil exporters Saudi Arabia, Iraq or Iran, oil prices could surge and negatively impact the US economic activity.

Such a scenario could unravel the US recovery, just as the United States is climbing out of the worst recession since the 1930s, he said.

Another potential trap is the possibility of protectionist measures on the Egyptian agricultural exports -- one of protestors' grievances is the rising cost of living, which could spark a rise in food prices. That could sting China, Japan, euro zone nations and others who import certain foodstuffs, he said.

IS "STAGFLATION" ON THE HORIZON?

A growing concern voiced in US media is "stagflation," which occurs when both the inflation rate and unemployment rate are persistently high, leaving a country economically stagnant.

It would work like this: instability spreads to other Arab countries, causing oil prices to shoot through the roof, which sparks inflation. At the same time, the markets take a hit, the Dow plunges and the jobless rate rises or remains where it is.

Those fears come at a time when jitters over inflation have been building worldwide, and such a scenario could damage the US economic recovery, some economic prognosticators maintain.

Indonesia and Turkey are in danger of high inflation, analysts said, and fears are building that some emerging markets could overheat.