Stock markets fall on Libyan unrest and high oil price

As violence spreads across Libya, fresh concerns have been raised about a fall in global oil supply

European stock markets have fallen sharply after unrest in Libya and the Middle East sent oil prices to a two-and-a-half year high.

The UK's FTSE and France's Cac index lost about 1.5% in early trading, while Germany's Dax was 0.7% lower.
Earlier, Asian stocks fell, in part due to an earthquake in New Zealand.
London Brent oil rose by almost $2 a barrel to $107.7, while US light crude jumped $8 a barrel to $94.2 following a market holiday in the US on Monday.
The price of London Brent crude had risen by more than 3% on Monday.
Brent is now at its highest price since September 2008, while US crude is at its highest point since October of the same year.
On Tuesday, Standard & Poor's (S&P) credit rating agency downgraded Libya from A- to BBB+, and said it could lower the rating further.
"We expect that the violent outbreaks of civil unrest seen in Libya's eastern region, and particularly the city of Benghazi, of the past few days will persist," S&P said.
Fellow agency Fitch downgraded the country on Monday.

Growing tension
 
Libya is the world's 12th-largest exporter of oil, and there are concerns that growing tensions in the country could hit oil production.
Spillover into other big regional producers, such as Saudi Arabia and Kuwait, is another concern that is forcing up the price of oil.
"The market is reacting to violence in the Middle East... and not to fundamentals," said United Arab Emirates Energy Minister Mohammad bin Dhaen al-Hamli.

However, Saudi Arabia's Oil Minister Ali al-Naimi said his country's spare production capacity could help "compensate for any shortage in international supplies".

Global oil companies have been pulling staff out of Libya as unrest continues to spread.
On Tuesday, Royal Dutch Shell said it had successfully relocated all its expat employees.

Very nervous

The rising price of oil, which fuels further rises in already high inflation rates and hits corporate profits, affected stock markets in Asia and Europe.
In France the Cac 40 index lost 1.6%, while the UK's FTSE 100 index fell 1.3%.
The Italian stock exchange, based in Milan, was suspended on Tuesday due to "technical problems". The market fell 3.6% on Monday on concerns about Italian companies' exposure to Libya.
Earlier, Japan's Nikkei index closed down 1.7%, South Korea's Kospi ended the day 1.7% lower and Hong Kong's Hang Seng was down 2.1%.
"The market is very nervous over news of violence in Libya, and that's driving prices," said Yinxi Yu of Barclays Capital.
"It looks like the uncertainty in the region is not going to be resolved anytime soon."
Unrest in the region could spark a wider correction in stock markets, analysts said.
"Given the fact that we have seen massive gains in stock markets over the last few months, investors have been nervous about a possible correction for some time," said Michael Hewson at CMC Markets.
"The tensions in the Middle East with Libya imploding and concerns that the unrest could spread to Saudi Arabia could provide a catalyst for [this] correction."
In Asia, market sentiment was also affected by an earthquake in New Zealand.
New Zealand's NZX 50 stock index fell 0.7% on concerns that the damage caused by the earthquake will add further to the country's growing debt.
The New Zealand dollar also weakened by nearly 2% against the US dollar.

Taking flight

Companies that depend on fuel, such as airlines, were among the biggest fallers on Asia's stock markets.
Fuel represents about 40% of operational costs for airlines, and investors are worried that the higher prices will eat into profits.
Shares in Singapore Airlines, the world's second-biggest carrier by market value, declined 1.7%, while Korea Airlines slumped 9% and Cathay Pacific Airways was down 4.5%.
In Taiwan, China Airlines lost 6%, dropping to its lowest value since 30 July. Shares in Australia's national carrier Qantas slipped 1.2%.
In Europe, Germany's Lufthansa was the biggest faller on the country's Dax index, slipping 2.4%, while in the UK, International Consolidated Airlines, formed from the merger of British Airways and Iberia, fell 3.6%.


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