LONDON: Global stock markets were under pressure Tuesday as violent unrest in Libya sent oil prices spiking above $108 but gave the traditional safehaven dollar a boost.
Dealers said reports of heavy loss of life in Libya as Moamer Khadafi clung to power hit sentiment while upheaval there and across the key Middle East region raised fears of a period of considerable political instability.
"The revolutions in Tunisia and Egypt are continuing to spread across the region. It seems to be Libya's turn now. These developments cause a high degree of uncertainty," said Commerzbank analyst Ulrich Leuchtmann.
Financial markets were also rattled by news of a deadly earthquake in New Zealand and a Moody's ratings downgrade for Japan because of its massive national debt, dealers said.
In London, the FTSE 100 index of leading shares closed down 0.30 percent at 5,996.76 points. In Paris, the CAC 40 fell 1.15 percent to 4,050.27 points but in Frankfurt the DAX held up better, slipping only 0.05 percent to 7,318.35 points.
In New York, the market opened lower on the Libyan lead as investors returned from a long holiday weekend to see Asia and Europe in the doldrums.
"The domino effect that is sweeping the Arab world is taking its toll on global financial markets," said Kimberly DuBord of Briefing.com.
"Risk assets are being sold off," she said.
A better-than-expected report showing US consumer confidence hit a 3-year high in February provided some support, limiting the losses for a while before the market resumed its downtrend.
"Consumers are more positive about the economy and their income prospects, but feel somewhat mixed about employment conditions," said Lynn Franco, director of the Conference Board's consumer research center.
The board's consumer confidence index rose to 70.4 percent in February, the highest level since the same month in 2008.
The blue-chip Dow Jones Industrial Average was down 0.93 percent at around 1715 GMT while the tech-heavy Nasdaq Composite was off 1.82 percent.
Oil prices jumped past $108 as Libyan production was hit by the protests and concerns grew over spreading unrest in the strategic crude-producing Middle East and North Africa area.
In early morning trade, Brent North Sea crude for delivery in April spiked to $108.57 per barrel, hitting the highest level since September 4, 2008 but slipped back later to $105.98, up 24 cents from Monday's closing level.
With Italy especially exposed to the problems in Libya, its former colony, the euro fell as low as $1.3525 but then recovered late in the day to $1.3641, down from $1.3678 on Monday when US financial markets were closed for the Presidents' Day public holiday.
"A trio of events have battered risky assets," said research director Kathleen Brooks at trading website Forex.com in London.
"Firstly, the ongoing people's uprising in Libya and the escalation of violence and casualties is weighing on the oil price; secondly the New Zealand earthquake; and lastly news that Moody's had revised lower its outlook on Japanese sovereign debt to negative from stable."
Libya denounced charges it was massacring protesters as lies Tuesday as Moamer Kadhafi broke cover over the challenge to his four-decade rule after a raft of diplomatic and military defections.
With the Middle East turmoil pushing oil prices ever higher, rulers of the Gulf state of Bahrain were confronted by fresh mass protests and governments made plans to evacuate citizens from hotspots across the Arab world.
Both the UN Security Council and Arab League were to meet to discuss the bloody crackdown by Libyan authorities that prompted the UN's rights chief to warn that crimes against humanity may have been committed.
"The ongoing tensions in the Middle East and North Africa region, in particular in Libya, are pushing the oil price higher and weighing on equity market sentiment," said VTB Capital economist Neil MacKinnon.
In Asian trade earlier Tuesday, Tokyo slumped 1.78 percent on the Moody's rating outlook downgrade and Hong Kong lost 2.11 percent.
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