Threat of Syria attack sends markets tumbling
Investors' fear of more Middle East turmoil sends oil prices soaring and hits Asian stocks hard
SPECULATION over a military strike against Syria has lead to a fall in stock markets and a jump in oil prices. Emerging markets in Asia were hit particularly hard: Japan's Nikkei 225 index dipped 2.3 per cent and Hong Kong's Hang Seng was down 1.3 per cent.
The falls follow hits to US and European markets yesterday: the FTSE 100 index closed down by 0.8 per cent and in the US the Dow Jones fell 1.1 per cent to a two-month low of 14,776.13.
Military intervention in Syria seems increasing likely as David Cameron warned the West cannot "stand idly by" in the wake of a chemical attack near Damascus and US Defence Secretary Chuck Hagel revealed that American forces are "ready to go".
Mike O'Rourke, chief market strategist at US-based Jones Trading, told the BBC: "This is the largest geo-political risk since the start of the Iraq war.
"I am not saying it will escalate to that point, but this war of words with Russia is the first time the US is pitted against another global [power] in a long time," he said, referring to warnings emanating from Syria's staunchest ally. "That creates an uncertainty this market is not accustomed to."
The possibility of military action pushed Brent crude to its highest price in six months at $114 a barrel. US crude jumped by $3.09 to close at $109.01 a barrel. Syria is not a prime oil producer but investors fear the turmoil in the region will have wider implications for the Middle East's supply.
Analysts raised concerns even before the latest developments in Syria as strikes and security disruptions in Libya have caused oil production there to drop by 60 per cent.
Bill Stone, chief investment strategist at PNC Asset Management, said: "People worry about this becoming a worst-case scenario and turning into a regional conflict." ·