Iraqi conflict eventually gets to international markets

The turn for the worse taken yesterday by the military operations in Iraq wreaked havoc among the world’s financial markets. The European markets plummeted, the indices on the Wall Street plunged, the dollar lost ground and oil soared.
The euphoria experienced by the markets when the first military actions in Iraq took place completely vanished when the allied forces met with strong resistance in the battle for the town of Nasiriyah in Southern Iraq, which blocked their road to Baghdad.
Dow Jones opened 2.33% down, while NASDAQ and S&P fell over 2%. Dow Jones had achieved the highest growth in 20 years last week.
As regards Europe, FTSE 100 had lost 2.98%, CAC 40 had shed 3.72% in Paris, while Germany’s Xetra Dax dropped 4.37%.
Oil on the US market became $1.15 more expensive, reaching $28.06, after a 25% fall last week. Brent oil on the London market gained $1.25, reaching $25.62/barrel.
The oil market is also affected by the Nigerian conflicts, which have made oil companies cut production by more than 800,000 barrels a day.
Dollar took the heaviest fall of the last five weeks against the euro, to 1.0645 dollars/euro. It also lost ground to the yen, from the 121.69 yens/dollar on Friday to 120.90 yens/dollar yesterday.
“When we left on Friday, it looked as if the war was moving forward to a rapid end,” said Robert Rennie, currency strategist in Sydney with Westpac Banking Corp. “Recent events show that was premature. The dollar may trade between $1.05 per euro and $1.0650 in coming days,” he said.
The investors on the US and European markets dropped shares and ran to gold and bonds for shelter. Hopes of quick successful war have started to fade and investors are again afraid the war might cut oil supplying from the Middle East.
“The market bet on the best case scenario. Any drifting away from that would push oil prices up. Prices could jump if the battle in Baghdad goes on for more than one month,” Gordon Kwan, HSBC Securities oil analyst said.
The sharpest falls on the European markets were posted by the heavily indebted financial groups. Germany’s insurer Allianz lost 5.4%, while French rival Axa shed 4.4%.
Allied forces had “the toughest day of resistance so far,” at Nasiriyah, said US Army Lieutenant General John Abizaid.
At least 30 allied forces soldiers have been killed since the beginning of the war. Fourteen were American and sixteen were British.
The most seriously hit in the US were the airlines that suddenly became unattractive due to the jump in the oil prices for the first time after eight days of decline.