LONDON, March 28 - Oil prices rose on supply fears on Friday to their highest since the war in Iraq began, stocks fell and gold rose as investors worried about the impact of a protracted conflict on the global economy. Wall Street looked set for a soft start and European and Asian shares fell, the dollar hit its lowest levels against the euro since war began and safe-haven government bond prices rose. Warplanes and cruise missiles pounded Baghdad and the U.S. ordered 100,000 more troops to the Gulf. President George W. Bush said on Thursday the campaign to oust President Saddam Hussein would be won "no matter how long it takes". "It's going to be a couple of months, judging by the noises coming out of Washington and it's not going to be as clean as everybody hoped," said David Thwaites, European equity strategist at BNP Paribas in London.
A poll of 11 fund managers published on March 20 produced a consensus forecast that the war would last four weeks. However, analysts have begun worrying about the impact a long war could have on the world economy with a particular focus on the price of oil. Crude prices hit their highest since the Iraq war began with some contracts over $30 a barrel, boosted by war concerns and a sharp cut in Nigerian output due to ethnic violence there. "The assumption to date has been that Iraq's export disruption would end by the start of the third quarter, which coincides with a significant global increase in the demand for OPEC oil," said oil analyst Michael Rothman of Merrill Lynch. "If Iraq's production outage extends beyond the second quarter period, OPEC would not be able to meet market requirements." However, OPEC Secretary-General Alvaro Silva said in Vienna there was plenty of oil supply in world markets.
"Even with the cessation of Iraqi exports and the temporary oil output reduction in Nigeria there is still plenty of oil on the market," he told a news conference. U.S. light crude was up 19 cents at $30.56 a barrel while London's May Brent crude was up 40 cents at $27.22 a barrel, off their highs for the day. Oil fell steeply last week after the United States invaded Iraq, but prices have recovered up to 14 percent since.
STOCKS DOWN, WALL STREET EXPECTED TO OPEN LOWER
March poll of global fund managers showed that in the run up to and early days of the Iraq war investors remained uncertain and unwilling to take major risks. U.S. managers moved out of stocks into bonds and cash. Britons and other Europeans made only small moves. Japanese investors said they planned to move into U.S. equities. "There is a sense that people are unwilling to take big bets anywhere and that is all part of the greater geopolitical concerns," said Jeffrey Palma, an asset allocator at UBS Warburg. The FTSE Eurotop 300 index <.FTEU3> of pan-European blue chip shares was down 1.03 percent while the narrower DJ Euro STOXX 50 index was off 1.13 percent. "Some investors were hoping for a quick resolution to the war in Iraq, so it is obviously worrying that Bush is preparing us for a long haul and the U.S. is calling up another 100,000 troops," said Matt Robertson, a European fund manager at Aberdeen Asset Management, which has about 1.1 billion euros ($1.2 billion) under management in European equities. U.S. stock index futures were down, indicating a weak opening on Wall Street. Tokyo Nikkei <.N225> closed down 1.06 percent, on concerns a drawn-out war would hurt chances of a recovery in global demand.
Yields on safe-haven government bonds, which move inversely to the price, were down. The two-year German Schatz note was yielding 2.51 percent, down 2.6 basis points, while the yield on the benchmark 10-year German Bund was down 5.6 basis points at 4.12 percent. U.S. Treasury yields were down. The 10-year note was yielding 3.9 percent, down 2.8 basis points. Gold partially recouped overnight losses, boosted in part by dollar weakness. Spot gold was at $330.10 an ounce, up from $328.40 at Thursday's close in New York. On the foreign exchange market, the dollar weakened against the euro, but talk of yen-selling intervention by Japan held the greenback up versus the yen. The dollar was down half a percent on the day against the euro at $1.0755 on rumours of a suspicious package on a New York bridge, though police said no such package had been found. The yen came under early pressure amid speculation Japan wanted to make sure the dollar is above 120 yen on March 31, when companies close their books for the end of Japan's business year. It last stood at 119.96 //