Stocks fall as oil reaches 18-month high on Syria, gold rallies

Stocks slid the most since June and oil surged to an 18-month high amid concern the U.S. will take military action against Syria. Treasuries, the yen and gold rose while Turkey’s lira and India’s rupee reached record lows.

The MSCI All-Country World Index dropped 1.3% at 4 p.m. in New York as the Standard & Poor’s 500 Index fell 1.6%, the worst declines in two months for both. Dubai’s benchmark gauge plunged 7%. Japan’s currency appreciated versus all 31 major counterparts and government bonds of the U.S., Germany and the U.K. rallied. The lira tumbled passed 2 per dollar for the first time and the rupee sank to 66.19 versus the dollar. Crude jumped 2.9% to $109.01 a barrel in New York and gold rose 1.9% to $1,420.20 an ounce.

U.S. benchmark stock indexes erased gains in the final hour of trading yesterday as Secretary of State John Kerry said yesterday that President Barack Obama believes there must be accountability for the “moral obscenity” of using chemical weapons in Syria, fanning concern unrest may disrupt Middle East oil supplies. An Ifo institute report today showed German business confidence rose for a fourth month in August, while U.S. data showed home prices increased at a slower rate and consumer confidence held near a five-year high.

“In the short-term, any type of uncertainty and conflict in the Middle East has negative implications, especially on the oil markets and secondarily the equity markets,” Tim Hoyle, director of research at Radnor, Pennsylvania-based Haverford Investments, which oversees about $6 billion of assets, said in a phone interview. “That causes investors to take stock of what they own and re-assess their risk tolerances.

Potential Response

Kerry didn’t say whether the U.S. would seek a mandate from the United Nations for potential responses. Russia, an ally of Syria that has a veto on the UN Security Council, has blocked previous UN action against Syria. Iran, another Syrian ally, has warned that a military strike against Syria will have ‘‘great consequences for the region,’’ Foreign Ministry spokesman Abbas Araghchi told reporters in Tehran today.

The U.K. Parliament was recalled from its summer recess and will meet Aug. 29 to debate the response to the suspected use of chemical weapons in Syria, Prime Minister David Cameron said. British armed forces are making contingency plans following an alleged attack in the Ghouta area outside Damascus on Aug. 21 that opposition groups say killed more than 1,300 people. The U.K. has said it’s convinced chemical weapons were used and that Syrian President Bashar al-Assad’s government is responsible.

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