Crude oil price climbs as Syria fears grow

Fears intervention could spill over into the rest of Middle East

Oil prices have reached their highest level since February following a sharp rise triggered by the threat of military action in Syria (Reuters)

Crude oil hit a six-month high and shares fell again today as growing fears of a Western attack on Syria and upheaval in the Middle East sent investors scurrying for cover.

Brent crude traded above $117 a barrel and US crude hit a two-year high while shares in London endured their second losing session in a row as the FTSE 100 index shed 27.87 to 6413.10.

The heightened market tensions pushed cash into gold and out of the risky Indian rupee.

Gold rallied to three-and-a-half-month highs above $1430 an ounce as rising tensions over Syria sparked safe-haven demand.

“Short term, the focus is likely to rest on what happens in the Middle East,” Credit Suisse analyst Tom Kendall said. “There is a degree of safe-haven demand from, in and around the Middle East, and with the move up in [the gold] price in the last couple of weeks, you’ve had something of the order of six million ounces of short-covering going through.”

The rupee slumped to a record low, trading higher than 68 rupees to the dollar, and Indian shares tumbled on growing worries that foreign investors will continue to sell out of a country facing stiff economic challenges and volatile global markets.

Japan’s Nikkei 225 Average sank 1.5% to close at 13,338.46, its lowest finish in two months, as export-linked shares fell sharply. Hong Kong’s Hang Seng index dropped 1.6 per cent to 21,524.65.

European stock markets were all down for the second day running, but none by more than 1%.

“Investors are sort of battening down the hatches a bit. I get the sense that this looks like a situation that is likely to be with us for a while,” said Ric Spooner, chief market analyst at CMC Markets.

“One reason the market has started to fall is that people are thinking this may not be a one-off blip that will only last a week. The stakes have been raised by the use of chemical weapons.”