Political turmoil in the Middle East and North Africa continued to haunt financial markets on Tuesday, pushing up crude oil, driving down stock prices and sending investors into safe-haven investments. The unrest seen during the overthrow of the leaders of Egypt and Tunisia has swept into Bahrain, Algeria and Libya. There have also been demonstrations in Yemen, Jordan, Syria and Lebanon.
“Over the past few weeks we had a domino effect, and the concern is that anything can happen,” said Justin Urquhart Stewart, a founder of Seven Investment Management in London. “At the moment the ripple is very small, but it has the potential to turn into something bigger quickly.”
Much of the uncertainty is being stoked by fears over oil supplies. Analysts have been keeping an eye on Libya, which has the largest oil reserves in Africa, and on Bahrain, which is next to Saudi Arabia.
“Geopolitical ripples in the Middle East are the basis for today’s decline,” said Lawrence R. Creatura, a portfolio manager at Federated Investors.
“Higher energy prices act like a tax on consumers, reducing the amount of discretionary purchasing power that they have,” Mr. Creatura said. “It represents an additional, potential headwind for retailers.”
Treasury prices rose and stocks declined in the United States, where the main Wall Street stock indexes have risen steadily in recent months to levels not seen since the financial crisis started.
In the last hour, the Dow Jones industrial average was down 205.33 points, or 1.66 percent. The broader Standard & Poor’s 500-stock index declined 29.58, or 2.2 percent, while the technology heavy Nasdaq lost 75.50 points, or 2.7 percent.
Markets in Europe and Asia were also lower. In Europe, the FTSE-100 in London lost 0.3 percent while the CAC-40 in Paris declined by 1.1 percent. In Asia, the Nikkei 225 closed 1.8 percent lower on Tuesday, and the Hang Seng in Hong Kong sank 2.1 percent. Financials, industrials and materials shares shed more than 2 percent in the broader market in New York trading. In addition to the turmoil in the Middle East, investors took in some discouraging developments in the United States economy. Source: Political Fight Over Unions Escalates.