* 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 (Reuters) - 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 York.
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 energy shares.
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.
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 government.
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 0.3 percent.
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.