Oil prices hit a new record and global equity markets buckled yesterday as military clashes between Israel and Lebanese guerrillas intensified investor fears over rising geopolitical risk.
West Texas Intermediate rose to a new peak of $76.40 a barrel on concerns that if Syria and Iran were drawn into the Israeli-Lebanese dispute, oil supplies from the region could be affected.
Prices eased later to $76.10 but were still up $1.15 on the day in late New York morning trade.
Kevin Norrish, energy analyst at Barclays Capital, said the rise was not a temporary move as the oil price was also supported by firm demand, tight supplies and bottlenecks in the global refining system.
That prospect unnerved equity market investors, adding to worries over the outlook for corporate earnings that have been rising with a disappointing start to the US second quarter results season.
The Iseq index of Irish shares fell by 1.7 per cent.
The military clashes in the Middle East also sparked another rise in investor risk aversion. The Chicago Board Options Exchange's Vix index, a measure of stock market volatility, jumped 10 per cent at one stage.
By close of trading, the Dow Jones Industrial Average had dipped below 11,000, losing 1.52 per cent to 10,846.29. The S&P 500 was down 1.3 per cent to 1,242.29, while the Nasdaq Composite was down 1.73 per cent to 2,054.11
In Europe, the FTSE Eurofirst dropped 1.43 per cent to 1,293.6.
