Markets shrug off oil threat

FINANCIAL MARKETS yesterday shrugged off the crisis in the Gulf, and crude oil prices fell after Wednesday's sharp gains, writes Lea Paterson.

Analysts said there was no evidence that Wednesday evening's attack on Baghdad had damaged Iraq's oil exporting facilities, and the price of benchmark London Brent crude slipped 54 cents to $10.84.

Tony Machacek, oil analyst at Credit Lyonnais Rouse, said: "On Wednesday, we knew there was a very good chance of an imminent strike and that was factored into the oil price rally. Now, we're seeing a setback to the price. Part of the logic behind that is there does not appear to have been any let up in the oil-for-food exports from Iraq."

Despite the fall in the price of crude oil, share prices of major oil companies rose in London trade, although the increases were lower than many analysts had been expecting.

Shell gained 9.5p to 358.5p, while BP rose 12p to close at 888.5p. Enterprise Oil, the exploration company, gained 0.5p to close at 303.5p.

The FTSE-100 share index had a jittery start while traders digested Wednesday night's developments. However, better-than-expected UK economic data and a robust start on Wall Street helped the index to close up 54.8 points at 5685.20. The strong performance of Hong Kong's benchmark share index - which broke through the psychologically important 10,000 barrier - also helped sentiment, analysts said.

Neil Parker, Treasury economist at Royal Bank of Scotland, said: "The markets just haven't been particularly concerned about the developments in Iraq. There's been little or no impact at all."

Traditional safe havens - such as the dollar and western government bonds - which normally benefit in times of global uncertainty did not post significant gains.

In morning trade in New York, the dollar fell against the Japanese yen and the German mark, amid concerns about the possible impeachment of President Bill Clinton.

James McGroarty, head of foreign exchange at Orbitex Capital Management, said: "The momentum in the last three days has accelerated in favour of impeachment. When you have that kind of political uncertainty, the dollar will come under pressure."

US bonds declined after the release of stronger than expected US trade, jobs and manufacturing data.

At lunch-time in New York, the Dow Jones was trading up 62.82 points - or 0.71 per cent - at 8853.42.