Stock markets fall on Libya fears

22 February 2011 Last updated at 10:04 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.

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.

Continue reading the main story Last Updated at 10:33

Market indexCurrent valueTrendVariation% variationGlobal 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%.

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."

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%.

A.nemdil & Press Agencies