By Eamon Quinn
European shares fell, with building and construction stocks and airline shares such as CRH, Kingspan, and Ryanair among the sufferers, as tensions between the US and Russia rose over Syria.
The price of Brent crude oil jumped for a second day, to $72.11 (€58.26) a barrel, its highest for three years, as concerns about the transport of oil supplies from the Gulf through the Middle East to Europe and other markets gripped the market. The traditional hedge in times of political trouble, gold also rose, to over $1,358 an ounce.
“With Russia having pledged itself to the defence of Syrian bases, it looks like we have the makings of a confrontation. Even if no Russian response is forthcoming to any possible US strike, it looks like relations between the two powers have hit a new low,” said Chris Beauchamp, IG’s chief market analyst.
“Trade wars now seem quite petty compared to the prospect of conflict, but the limited reaction in equities might suggest the market is not prepared to ‘sell the rumour and buy the fact’ just yet,” he said.
“It feels like there are expectations that the US is going to take some action against Syria, The market, I don’t believe, has priced one yet,” said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York.
In Ireland, Ryanair was down almost 3%, while CRH fell 1%, and Kingspan was around 2% lower. The fall in US stock markets was more subdued.
“Geopolitical tensions in the Middle East are currently supporting prices but we think that growing supply will eventually cause stocks to rise which will drag prices back down by the end of the year,” according to capital Economics in London. “What’s more, if tensions ease, prices could drop more sharply than we expect,” it said.
Turkey, which has troops in Syria, saw its currency weaken to a record, while the Borsa Istanbul 100 Index for stocks reversed gains to drop 1.3%. The US relationship with Russia is “worse now than it has ever been, and that includes the Cold War,” President Trump said. “There is no reason for this. Russia needs us to help with their economy, something that would be very easy to do, and we need all nations to work together. Stop the arms race?” But the surge in the price of oil may paradoxically help Russia for the time being.
Mr Trump’s gleeful warning that Russia should “get ready” for a missile barrage in Syria sent the ruble to its lowest level in 16 months. But the surge in the price of Brent could boost Russia’s finances.
- Additional reporting by Reuters and Bloomberg.