* Oil just below six-month high; some profit-taking
* Dollar gains as Syria worries trigger safety bid
* Syria fears lift U.S. energy stocks; Wall Street up
By Angela Moon
NEW YORK, Aug 28 Concerns about a possible
U.S.-led military strike on Syria sent oil prices higher on
Wednesday and triggered a safe-haven run to gold and the dollar.
Brent crude oil futures for October delivery settled
up $2.25, or 1.97 percent, at $116.61 a barrel after reaching a
six-month high of $117.34.
Fears that Western countries were preparing to attack Syria
raised concerns about the security of oil supplies across the
Middle East, which pumps a third of the world's oil.
Front-month U.S. crude oil futures ended up $1.09, or
1 percent, at $110.10 a barrel after rising as high as $112.24,
the highest since May 2011.
"The regional implications have perhaps been underestimated
by the market and could potentially impact major producers like
Iraq and Iran, as well as the wider region," said Katherine
Spector, head of commodity strategy at CIBC World Markets in New
French bank Societe Generale said Brent could spike to $150
if the conflict in Syria spreads and disrupts supply in the
region. Syrian oil output is not a factor. It has fallen to
50,000 barrels per day from around 350,000 bpd when the unrest
started two years ago.
The United Nations Security Council was set for a showdown
over Syria on Wednesday as Britain sought authorization for
Western military action that Russia called premature and seemed
certain to block.
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 the belief it is the ultimate refuge from the risks of
intensified upheaval in the Middle East.
But U.S. stocks, considered risky assets, rose as selling
waned following Tuesday's decline, the worst for the benchmark
S&P 500 index since June. The rise in oil prices lifted
The dollar rallied across the board as investors sought
safety. Investors, having bought the yen and Swiss franc a day
earlier amid Syria-related concerns, also locked in steep gains
in those currencies on Wednesday. The dollar, yen and Swiss
franc are all considered safe havens in times of economic stress
and geopolitical turmoil.
Emerging markets, already pummeled by an expected reduction
in the U.S. stimulus program, took further hits. The Turkish
lira and India's rupee both touched record lows against the
dollar. The Indonesian rupiah was hit once again, and global
equity markets fell broadly.
In the Middle East, Dubai's stock index shed 1.3
percent to add to the 7 percent loss recorded on Tuesday,
leaving it near a six-week low.
WALL STREET REBOUNDS
In U.S. equities markets, stocks moved higher after the S&P
500 posted its biggest daily decline since June in Tuesday's
session. Equities have been pressured recently on heightened
geopolitical worries following an alleged chemical weapons
attack on Syrian civilians by President Bashar al-Assad's
During Wednesday's session, energy shares rose 1.8
percent, by far the biggest gainer among S&P 500 sectors.
Chevron Corp gained 2.5 percent to $121.81, while Exxon
Mobil was up 2.3 percent at $88.84.
"If you want a hedge against Middle East uncertainty, energy
shares will serve you well," said Jim McDonald, chief investment
strategist at Chicago-based Northern Trust Global Investments.
McDonald, who helps oversee $803 billion in assets,
downplayed the impact military action could have on U.S.
markets, saying that "surgical involvement" appeared more likely
than "broad-scale activity, which is enough to give investors
comfort about the impact of any involvement."
The Dow Jones Industrial average closed up 48.38
points, or 0.33 percent, at 14,824.51. The Standard & Poor's 500
Index was up 4.48 points, or 0.27 percent, at 1,634.96.
The Nasdaq Composite Index was up 14.82 points, or 0.41
percent, at 3,593.35.
The CBOE Volatility Index, a measure of investor
anxiety, fell 1.7 percent, although it remains up more than 17
percent on the week.
In Europe, the FTSEurofirst 300 fell 3.80 points,
or 0.3 percent, to 1,198.56, finding technical support around
1,192 after breaking below the 50-day moving average.
Heavy selling across Asian markets, particularly in
southeast Asia, sent MSCI's main emerging equity index
down 0.6 percent and left its world equity index
, which tracks shares in 45 countries, at
seven-week lows before it recovered slightly. It was last down
Amid the worries over Syria, investors largely shrugged off
data showing euro zone bank lending contracted further in July,
which highlighted the fragility of the bloc's nascent recovery
and should keep pressure on the European Central Bank to
maintain its expansive monetary policy.
Prices for U.S. Treasuries slid on Wednesday after three
days of gains, with a lackluster debt sale. Worries about a
multi-national military strike on Syria helped drive investors
out of risk assets and into safe havens such as U.S. government
debt earlier this week, but those fears abated somewhat on
Wednesday, analysts said.
The price of the benchmark 10-year Treasury note US10YT=RR
fell 21/32 to yield 2.785 percent on Wednesday, from 2.71
percent late on Tuesday.