* Brent crude hits 6-month high as West readies Syria strike
* Dollar gains as Syria worries trigger safety bid
* Wall St slightly higher after sharp selloff
By Angela Moon
NEW YORK, Aug 28 The possibility of a U.S.-led
military strike on Syria hit emerging market assets hard on
Wednesday and pushed oil prices to a six-month high while
triggering a safe-haven run to gold and the dollar.
Brent crude oil surged, hitting a six-month high of $117.34
a barrel, on fears Western countries were preparing to attack
Syria, raising concerns over the security of oil supplies across
the Middle East, which pumps a third of the world's oil.
French bank Societe Generale said Brent could spike to $150
if the conflict in Syria spreads and disrupts supply in the
region. Syrian oil output is not a factor: it has fallen to
50,000 barrels per day from around 350,000 bpd when the unrest
started two years ago.
"The concern is that an attack on Syria will reverberate
through the region, increasing the spillover into other
countries and possibly resulting in a larger supply disruption
elsewhere," said Michael Wittner, oil analyst at the bank. Over
the coming days, Brent could surge to $125, either in
anticipation of an attack or in reaction to its start, he said.
In the scramble for safety, investors turned to gold, which
hit a 3-1/2 month peak above $1,430 an ounce, and bought the
dollar on a view that it was the ultimate refuge from the risks
of intensified upheaval in the Middle East.
But U.S. stocks, which are considered risky asserts, opened
slightly higher as selling pressure waned in the wake of
Tuesday's worst decline for the S&P 500 since June.
Emerging markets, such as Syria's neighbor Turkey, already
pummeled by an expected reduction in U.S. stimulus measures,
took further hits. The Turkish lira and India's rupee both
touched record lows against the dollar. The Indonesian rupiah
was hit once again, and global equity markets fell broadly.
The dollar rebounded against the yen and climbed versus the
Swiss franc as investors sought the greenback's safety. The
dollar was up 0.5 percent at 97.50 yen, recovering from
an intra-day trough of 96.83 that matched the lowest level two
weeks ago, according to Reuters data.
"The dollar's rally is clearly related to Syria," said David
Starkey, senior market analyst at Cambridge Mercantile Group in
Toronto. "Investors realize that the dollar is still the safest
currency to be in right now. Also, momentum is indicating that
it's time for the dollar to pick up a little ground."
In the Middle East, Dubai's stock index shed 1.4
percent to add to the 7 percent loss recorded on Tuesday,
leaving it near a six-week low.
In Europe, the spike in oil prices hit airline shares,
helping push down European equities for a third day. But oil
producers such as Statoil and BG Group gained.
Heavy selling across Asian markets, particularly in
southeast Asia, sent MSCI's main emerging equity index
down 0.5 percent and left its world equity index
, which tracks share moves in 45 countries, down
0.5 percent at seven-week lows before it recovered slightly. It
was last down 0.2 percent.
The Dow Jones industrial average was up 72.01 points,
or 0.49 percent, at 14,848.14. The Standard & Poor's 500 Index
was up 9.27 points, or 0.57 percent, at 1,639.75. The
Nasdaq Composite Index was up 23.03 points, or 0.64
percent, at 3,601.55.
Brent was at $115.46 per barrel, up $1.10, while
U.S. crude rose 85 cents to $109.86, after hitting an
intraday peak of $112.24 - its highest since May 2011.
Amid the worries over Syria, investors largely shrugged off
data showing euro zone bank lending contracted further in July,
which highlighted the fragility of the bloc's nascent recovery
and should keep pressure on the European Central Bank to
maintain its expansive monetary policy.
However, flight-to-quality demand buoyed German government
bonds, sending the 10-year Bund yield down 3 basis
points to 1.824 percent as it moves further away from Friday's
1-1/2 year highs of 1.98 percent.
The benchmark 10-year U.S. Treasury note was
down 18/32, the yield at 2.7744 percent.