NEW YORK: Oil rose above $125 a barrel on Friday to its highest since August 2008 on concerns of long-term supply cuts, while expectations of more interest rate hikes in the euro zone drove the euro to a 15-month peak against the dollar.
Commodities, including metals, gained broadly on expectations of stronger demand and, in some cases, the threat of supply shortages.
Global equities were boosted by optimism the worldwide economic recovery will fuel demand for commodities, and shares hit their highest level in almost three years. US stocks opened higher but were little changed by late morning.
Boosted by Thursday's European Central Bank rate hike, the euro rose to its highest since January 2010. The currency was last up 0.8 percent at $1.4413.
The greenback was also pressured by the prospect of a US government shutdown, and US 10-year Treasury yields rose near six-week highs.
Republicans and Democrats have been in budget talks trying to reach an agreement that would avert a government shutdown at midnight.
The ECB's move to raise its key interest rate to 1.25 percent has widened the euro zone's yield advantage over the United States, Britain and Japan, where rates remain at record lows.
ECB President Jean-Claude Trichet said policymakers were ready to tighten further if needed. But he stressed the ECB had not decided that Thursday's move was the first in a series.
"Trichet's press conference was neutral and suggests to us that the bank is embarking on a gradual series of rate increases of perhaps 25 basis points per quarter," said Jon Wetreich, currency strategist at Brown Brothers Harriman.
Stronger-than-expected German trade data helped underscore the health of the euro zone's largest economy, helping investors sidestep resurgent doubts over the resilience of the zone following Portugal's request this week for aid to cope with its debt.
PROTESTS ERUPT
Brent crude surged $2.63 to $125.30 per barrel on the weak dollar and after attacks on Libyan oil fields. Ongoing unrest in other parts of the world and postponed elections in Nigeria have also led to a bullish attitude on oil.
Libyan rebels said they repulsed a government assault on the besieged city of Misrata but prospects faded for a military overthrow of Muammar Qadhafi.
Protests erupted across much of the Arab world on Friday, the Muslim day of prayer, with demonstrators dying in Syria and Yemen. Egyptians staged one of the biggest rallies since President Hosni Mubarak's fall.
Spot gold hit another record high and silver climbed past the $40 an ounce level for the first time since 1980.
Mining shares led European stock gains and the FTSEurofirst 300 index provisionally closed up 0.2 percent. The MSCI main world equity index rose 0.6 percent to its highest since July 2008, on track for its third consecutive weekly gain.
The Dow Jones industrial average edged down 4.16 points, or 0.03 percent, at 12,405.33. The Standard & Poor's 500 Index added 0.34 points, or 0.03 percent, to 1,333.85. The Nasdaq Composite Index was off 1.84 points, or 0.07 percent, to 2,794.30.
In Washington, the White House and Congress worked to break a budget deadlock and avoid a federal government shutdown, after President Barack Obama and congressional leaders failed to reach a deal in late-night talks.
"With all the focus recently on debt problems in the euro zone periphery, what is going on in the US highlights that the US has budget problems of its own, while the euro continues to be driven by the prospect of more rate hikes," said Carl Hammer, currency strategist at SEB in Stockholm.
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