Oil hits six-month high, global shares down on Syria

Wed Aug 28, 2013 10:23am EDT
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By Angela Moon

NEW YORK (Reuters) - The prospect of Western military action against Syria hit emerging market assets hard on Wednesday, pushed oil to a six-month high and fueled a rebound in the dollar as investors sought the greenback's safety.

U.S. stocks opened slightly higher as selling pressure waned in the wake of Tuesday's worst decline for the S&P 500 .SPX since June.

In the scramble for safety, investors turned to gold, which hit a 3-1/2 month peak above $1,430 an ounce, and bought the dollar on a view that it was the ultimate refuge from the risks of intensified upheaval in the Middle East.

Emerging markets, such as Syria's neighbor Turkey, already being pummeled by an expected reduction in U.S. stimulus measures, took further hits. The Turkish lira and India's rupee both touched record lows against the dollar.

"The dollar's rally is clearly related to Syria," said David Starkey, senior market analyst at Cambridge Mercantile Group in Toronto. "Investors realize that the dollar is still the safest currency to be in right now. Also, momentum is indicating that it's time for the dollar to pick up a little ground."

The moves stem from signs the United States and its allies are gearing up for a strike against President Bashar al-Assad's forces, blamed for last week's chemical weapons attacks. Traders fear such a move could prompt retaliatory action, engulfing a region that supplies a third of the world's oil.

At one point those concerns pushed Brent crude above $117 a barrel and the U.S. benchmark to its highest level in over two years, though both subsequently eased off the highs in volatile trading.

In the Middle East, Dubai's stock index .DFMGI shed 1.4 percent to add to the 7 percent loss recorded on Tuesday, leaving it near a six-week low.   Continued...

A man walks through the lobby of the London Stock Exchange August 5, 2011. REUTERS/Suzanne Plunkett