Libya tensions sent fresh shockwaves across financial markets yesterday, as equities fell, oil soared close to $120 and the dollar plunged to a record low against the safe-haven Swiss franc.
Europe’s main stock markets extended recent losses, with sentiment plagued by Libya where Leader Muammar Gaddafi is clinging onto power but his opponents appear to be in control of swathes of the nation.
Brent North Sea crude for delivery in April rallied as high as $119.79 per barrel, which was the highest level since August 22, 2008, as Libya violence stoked supply jitters across the Middle East and North Africa.
“The disruptions and uncertainty throughout North Africa remains rife and European markets are in the red once again,” said Capital Spreads analyst Simon Denham.
“Already this morning we have seen oil spike further with Brent almost hitting $120 a barrel.”
The dollar slumped to an all-time low of 0.9341 Swiss francs, as investors flocked to the safe haven currency amid fears that turmoil in Libya will push oil even higher. The Japanese currency also climbed against the euro and dollar.
“The traditional safe haven currencies of the yen and the Swiss franc are currently outperforming as fears build that escalating social and political tensions in Africa and the Middle East will lead to a significant supply-driven oil price shock, dealing a sizeable negative blow to global growth ahead,” said economist Lee Hardman at The Bank of Tokyo-Mitsubishi UFJ.
Foreign energy companies have halted or slashed their output from Libya as a result of the violence.
Spain’s biggest oil company, Repsol, stopped production earlier this week, as anti-government protests spread in Libya.
Italy’s ENI, the biggest foreign energy major in Libya, said yesterday that it has cut oil production in the country by over 50 per cent due to the ongoing unrest.
British energy giant BP has meanwhile evacuated all expatriate staff from the restive country.
Most Asian stock markets also fell yesterday as traders worried about turmoil in Libya and the possibility of further contagion within the oil-rich Arab world.
Hong Kong tumbled 1.34 per cent and Tokyo fell 1.19 per cent, while Sydney closed down 0.75 per cent.
Col Gaddafi had vowed yesterday to purge opponents “house by house” and “inch by inch”, drawing condemnation from US President Barack Obama.
With Libya crude shipments curtailed, Brent North Sea crude – which is more sensitive to Middle East unrest because of Europe’s greater dependence on oil from the region – has soared this week.
Morocco, Bahrain, Yemen and Iran are already witnessing uprisings, after similar movements led to the ouster of the presidents of Egypt and Tunisia. In Saudi Arabia King Abdullah decreed an increase in social benefits to try to head off a similar fate.
Asian and European markets were also dragged down by a 0.88 per cent fall in Wall Street trade on Wednesday.