Indeed, the sudden emergence of the Islamic State of Iraq and al-Sham (ISIS), the group now spreading terror throughout large tracts of Iraq, can be traced back to a bitter falling out earlier this year between its leaders and Zawahiri after he wrote to them complaining that the brutality of the tactics they regularly employed in the Syrian conflict – public beheadings, crucifixions, floggings and stoning – was threatening to damage the al-Qaeda brand.

This might sound a bit rich coming from someone who has no qualms about authorising suicide bombers to kill innocent civilians. But the rift culminated with Zawahiri denouncing the ISIS as a renegade band that waged war against fellow Muslims through its campaign of car bombings, mass killing and the widespread torture of its own citizens.

The quarrel certainly helps to illustrate the more radical agenda being pursued by this new generation of jihadis who, in their determination to achieve the elusive Islamist goal of establishing their own independent state, have adopted tactics so brutal that even bin Laden die-hards regard them as being beyond the pale.

Their uncompromising outlook is clearly evident in the Islamic code ISIS issued yesterday to the remaining inhabitants of Mosul, Iraq’s second largest city, which has now fallen under their control following their dramatic sweep through the north of the country earlier this week.

Their uncompromising outlook is clearly evident in the Islamic code ISIS issued yesterday to the remaining inhabitants of Mosul, Iraq’s second largest city, which has now fallen under their control following their dramatic sweep through the north of the country earlier this week.

The instructions bear a striking resemblance to the rulebook that was implemented in Afghanistan following its takeover by the Taliban in the Nineties. Under the edict “repent or die”, local tribal chiefs and the security forces have been ordered to renounce all contact with the democratically elected government in Baghdad on pain of death. Many captured Iraqis have already been subjected to mass beheadings and crucifixions to encourage others to lay down their arms.

Other residents have been instructed to attend the mosque five times a day for prayers while all alcohol, drugs and cigarettes have been banned. Women are being encouraged not to venture outside, and to dress in modest clothing that covers their flesh when they do. Punishments, such as flogging and the amputation of limbs, will be implemented for any transgressions in the “special places” ISIS plans to set up for acts of repentance.

While to Western eyes such practices threaten to return Iraq to the dark ages, the architects of this creed believe they are on a divine mission to return the Arab world to the glorious era of the Islamic caliphate.

David Fuller's view

Here is The Telegraph Article.

How much of an affect can this situation have on global stock markets?

We cannot tell because in news jargon, it is ‘a breaking situation’.  However, monetary policies remain accommodative and stock markets have had a good run recently, reaffirming a number of uptrends in the process.  The DJ World Stock Index (monthly & weekly) reached a new all-time numerical high.  Nevertheless, valuations have risen in the better performing stock markets, not least within the USA.  A number of short-term overbought conditions were evident at the beginning of this week, including for the USA.  

Consequently, many stock markets were due for at least a reaction and consolidation within their overall upward trends.  Thereafter, the short to medium-term outlook for stock markets probably depends more on what happens to oil prices (WTI and Brent), than any other known factor.  They have firmed recently and every additional dollar to the upside will increase near-term risk for stock markets.  Conversely, a pullback beneath $100 by WTI and $110 by Brent would considerably reduce worries about oil prices.