Syrian tensions hit markets

The growing likelihood of Western military action against Syria pummeled Asian stock markets yesterday and sent the price of oil soaring.

Fears that the US, Britain and other countries are gearing up to confront Syria over its alleged use of chemical weapons against civilians rose after Defence Secretary Chuck Hagel said the US military stands ready to strike against Syria.

"While we believe that the market tensions should not last for too long ... sentiment will continue to be under pressure until the situation shows signs of easing," said Anthony Lam of Credit Agricole in Hong Kong.

Japan's Nikkei 225 index sank 1.5 per cent to 13,338.46. Hong Kong's Hang Seng dropped 1.6 per cent to 21,524.65. South Korea's Kospi declined 0.07 per cent to 1884.52. Australia's S&P/ASX 200 fell 1.05 per cent to 5087.16. Benchmarks in the Philippines, Indonesia and mainland China also fell.

US stocks were hit with a broad sell-off yesterday. The Dow Jones industrial average lost 1.1 per cent to close at 14,776.13. The Standard & Poor's 500 index declined 1.6 per cent to close at 1630.48. The Nasdaq composite was down 2.2 per cent, to 3578.52.

The tensions with Syria overshadowed two positive reports on the US economy. The Conference Board said its consumer confidence index rose to 81.5 in August, up from 80.3 the month before and beating expectations. A survey on home prices showed a strong rise from the year before.

Syria is not a big oil producer, but traders are worried that a showdown could escalate into a regional conflict that might disrupt the flow of oil from the Middle East.

Benchmark oil for October delivery was up US$2.16 to US$111.16 a barrel in electronic trading on the New York Mercantile Exchange. The contract jumped US$3.09 yesterday to US$109.01 a barrel on the Nymex. That's the highest closing price since February 2012, although oil remains far below its record close of US$145.29 a barrel, reached in July, 2008.

- AP