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Oil, gold jump, stocks slip on Middle East conflict

by Jessica Weisman-Pitts
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Oil, gold jump, stocks slip on Middle East conflict

By Caroline Valetkevitch

NEW YORK (Reuters) -Oil prices jumped more than 4%, the U.S. dollar edged up against the euro and global stock indexes eased on Monday as military clashes between Israel and the Palestinian Islamist group Hamas raised fears that the conflict could spread beyond Gaza.

The conflict also lifted gold prices.

Israel’s shekel weakened sharply. The dollar was last up 3% at 3.950 shekels.

The Bank of Israel earlier said it will sell up to $30 billion of foreign currency to maintain stability. Israeli government bonds also fell, with the 2120 Hundred Year bond down 5.3 cents on the dollar at a record low.

Israel on Monday said its troops had killed armed infiltrators entering the country from Lebanon, raising concern the war could widen to a second front, two days after Hamas gunmen burst in from Gaza on a deadly rampage.

U.S. crude recently rose 4.37% to $86.41 per barrel and Brent was at $88.09, up 4.15% on the day.

The Dow Jones Industrial Average fell 13.86 points, or 0.04%, to 33,393.72, the S&P 500 lost 6.7 points, or 0.16%, to 4,301.8 and the Nasdaq Composite dropped 75.65 points, or 0.56%, to 13,355.69.

The pan-European STOXX 600 index lost 0.28% and MSCI’s gauge of stocks across the globe shed 0.12%.

“The market at this point has focused on the diplomatic efforts to keep Israel focused on Hamas and reduce the prospect of escalation. There’s an all-out global diplomatic effort to keep this conflict from expanding into the oil-rich region,” said Quincy Krosby, chief global strategist, LPL Financial in Charlotte, North Carolina.

“We don’t see a ‘sell now, ask questions later’ market.”

Against the dollar, the euro fell 0.4% to $1.0544.

The cash Treasury market is closed on Monday for Columbus Day, while 10-year Treasury futures rose.

Gold was also in demand, rising around 1% to $1,851 an ounce.

The conflict in the Middle East comes at a time when markets are jittery and bond yields around the world are at multi-year highs.

Investors will be anxious to see U.S. consumer price index data, due this week.

They also await the unofficial kickoff of the third-quarter U.S. corporate earnings season, with results from J.P.Morgan and other banks due later this week.

(Additional reporting by Wayne Cole in Sydney and Alun John in London; Editing by Lincoln Feast, Kirsten Donovan and Sharon Singleton)