Oil Hits Six-Month High Amid Syria Tensions

Oil prices have reached their highest level since February after markets reacted to the threat of military action in Syria.

Following their biggest one-day rally in six months on Tuesday, London Brent oil prices rose another 0.3% in early trading to reach $115 a barrel.

Meanwhile, the price of US crude soared to a two-year high of over $110 a barrel.

Global stock markets took the blow as investors shifted to safe-haven assets, such as gold and government bonds.

As a result gold prices increased, hitting a three-and-a-half month record of $1,433,850 an ounce.

Airlines were also hit, with shares dropping for British Airways owner International Airlines Group and budget carrier easyJet.

In London the FTSE 100 declined, while European markets were also down.

The price of brent crude oil at 1.28pm on Wednesday

Ishaq Siddiqi, market strategist at ETX Capital, warned that tensions in the Middle East could trigger major disruption to oil supply.

He said: "Once filtered through to the real global economy, the increase in oil prices will put a halt to the current pace of economic momentum we are currently experiencing in major parts of the world.

"It's plausible that Brent oil prices could be over $120 a barrel in the coming days - and, if oil prices spike even higher, it wouldn't be out of the question for the Federal Reserve to hold off on tapering stimulus measures this year."

Although Syria is not a major oil producer, there are concerns that the conflict could spread, disrupting the flow of oil from the Middle East, including oil rich countries such as Iran and Iraq.

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Italian tensions in focus as emerging markets steady

1 of 3. A man walks through the lobby of the London Stock Exchange August 5, 2011.

Credit: Reuters/Suzanne Plunkett

By David Gaffen

NEW YORK | Mon Aug 26, 2013 1:46pm EDT

NEW YORK (Reuters) - U.S. Treasury bonds rallied after a weaker-than-expected result for durable goods orders, but global equity markets were relatively calm in an otherwise slow Monday trading session.

One exception was in Italy, where the risk of a new government crisis sent shares and bonds tumbling.

Orders for long-lasting U.S. manufactured goods fell the most in nearly a year in July and a gauge of planned business spending on capital goods tumbled.

The weak data boosted prices in the U.S. bond market, where the benchmark 10-year U.S. Treasury note was up 3/32, the yield at 2.80 percent.

The durable goods report was the latest in a series of data points that have kept expectations for the Federal Reserve's next step muddled. Economists largely expect the Fed will start to reduce its $85 billion in monthly purchases of debt, but some uncertainty over this remains.

Craig Dismuke, chief economic strategist with Vining Sparks in Memphis, Tennessee, said the news would not stop the Fed from "tapering," but that the Fed "might taper less than expected."

The debate over the Fed's plans and its impact on emerging economies has dominated markets in recent weeks.

The Dow Jones industrial average .DJI was up 13.42 points, or 0.09 percent, at 15,023.93. The Standard & Poor's 500 Index .SPX was up 2.04 points, or 0.12 percent, at 1,665.54. The Nasdaq Composite Index .IXIC was up 18.76 points, or 0.51 percent, at 3,676.55.

"The numbers were disappointing this morning, but maybe we've returned to one of those odd situations where bad news is good for the market in terms of the Fed tapering," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

In Italy, members of Silvio Berlusconi's center-right People of Freedom party said on Sunday they would force early elections if their center-left coalition allies voted next month to expel the former Italian premier over a tax fraud conviction.

Italian shares .FTMIB ended down 2.1 percent, but the broader euro zone stock market .STOXX50E was down just 0.2 percent. Italy's bonds fell, taking Spanish and Portuguese bonds down with them.

Investors are worried that Italy's plans to mend its finances will fall apart if the coalition crumbles and that being without a government could make it tricky for the European Central Bank to shield it from market pressure.

"If you have new elections now there is a high risk you would not have a majority government, so that is why we are seeing a widening of spreads in the periphery," said ING rate strategist Alessandro Giansanti. He noted the timing is poor, given Italy is set to sell bonds this week.

EMERGING LULL

After the turmoil of last week .MSCIEF, share indexes in India gained ground, though there were modest falls in Indonesia and both countries' currencies weakened again against the dollar. .

Investors are expecting improving returns from advanced economies while India, Indonesia and Brazil have all scrambled in recent weeks to try to stem destabilizing outflows that have crippled their currencies.

The Indian rupee weakened on Monday, tracking offshore rates, while month-end dollar demand from importers also dragged the currency lower. The country's central bank stepped in to sell dollars to try to restrain the decline, which has taken the rupee to record lows.

Against the yen, the dollar traded at 98.67 off Friday's peak of 99.15, while the euro bought $1.3369, having climbed as high as $1.3410.

Spot gold, which as an inflation hedge has benefited from the global flood of liquidity, briefly popped above $1,400 an ounce for the first time since early June, extending Friday's 1.5 percent rally. It last stood at $1,396.36.

U.S. crude slipped to $106.42 a barrel, while Brent was down slightly at $110.96.

(Additional reporting by Ellen Freilich and Rodrigo Campos; Editing by John Stonestreet, Ruth Pitchford and Dan Grebler)

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Bombings at Tripoli mosques kill at least 27, add to tensions in Lebanon

The bombs detonated outside two Sunni mosques in the port city, 50 miles north of Beirut, the capital, as worshipers gathered for Friday prayers.

Lebanese television stations showed huge plumes of smoke rising from the explosion sites Friday, as bleeding victims and dead bodies were carried away from the wreckage.

The incident comes just more than a week after an explosion killed 27 people in a Shiite suburb of Beirut. That explosion was the country’s most deadly bombing since the 1980s, and analysts warned it could mark a new era of Sunni vs. Shiite retaliatory bombings that target civilians.

No one had claimed responsibility for the Tripoli bombings by Friday afternoon. In a statement, caretaker prime minister Najib Mikati blamed the “hand of criminality” for the bombings, which he described as “a clear message aimed to plant strife.”

One of the explosions targeted al-Taqwa mosque, where the Salafi cleric Salem al-Rifai preaches. Rifai survived an assassination attempt in April, when gunmen opened fire outside the mosque’s entrance.

Another bomb hit the al-Salam mosque. At both mosques, the imams escaped safely, according to Lebanon’s state-run National News Agency, which said a total of 27 people had been killed and as many as 352 injured. Hospitals put out calls for donations of blood.

Tripoli, a poverty-stricken coastal city, has a reputation for being Lebanon’s most volatile and the one where the country’s deeply rooted sectarian fault lines are most pronounced.

Sunni gunmen regularly battle Tripoli’s small community of Alawites, who are an offshoot of the Shiite sect and co-religionists of Bashar al-Assad, president of neighboring Syria.

Since the outbreak of civil war in Syria more than two years ago, clashes between Sunnis and Alawites have grown more frequent, especially since Lebanon’s Shiite Hezbollah group sent troops to Syria to help Assad battle the Sunni-dominated rebels.

That decision has triggered reprisal attacks against Hezbollah from Sunni groups, which Hezbollah’s leader, Hasan Nasrallah, blamed for last week’s Beirut bomb.

There was no way to immediately determine whether Friday’s double bombing might have been connected to the Sunni-Shiite strife.

Earlier Friday, Israel said it bombed a militant group’s base in Lebanon in response to the launching of four rockets across its northern border Thursday afternoon. It was Israel’s first airstrike inside Lebanon since its 2006 war with Hezbollah.

The target was a base belonging to the Popular Front for the Liberation of Palestine General Command near the town of Naameh, just 10 miles south of Beirut, the state-run news agency reported.

The Popular Front denied involvement in the rocket attack inside Israel, for which an al-Qaeda-linked organization had claimed responsibility.

The escalation comes at a time of increased tension between Lebanon and Israel, also due in part to the entrenched Syria conflict. Hezbollah claimed responsibility last week for planting explosives that injured four Israeli soldiers near the border in early August.

In a statement, the Israeli military described the cross-border rocket attack Thursday as “a blatant breach of Israeli sovereignty that jeopardized Israeli civilian life.” An Israeli military spokesman said the pilots who carried out the retaliatory airstrike “reported direct hits on the target,” adding that, “Israel will not tolerate terrorist aggression originating from Lebanese territory.”

A journalist at the scene for Lebanon’s Daily Star newspaper said the entrance to one of a series of underground tunnels belonging to the Popular Front was damaged in the raid.

Speaking to Lebanon’s state-run al-Manar television station, Abu Imad Ramez Mustafa, a Popular Front official, said he was surprised his group had been targeted when another had claimed responsibility.

On Thursday, the Lebanese branch of the Abdullah Azzam Brigades, an Islamist group with links to al-Qaeda, said it had carried out the rocket attack. The group, known as the Ziad al-Jarrah Battalion, is named after a Sept. 11, 2001, hijacker who was from Lebanon.

“Praise and thanks be to Allah,” read a post on a Twitter account known as an outlet for the group, which has asserted responsibility for firing rockets into Israel in the past.

Booth reported from Jerusalem.

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