Wall Street Plunges on War Fears

Markets today wobbled as stiffer than expected Iraqi resistance dented hopes for a quick war.

Wall Street opened sharply lower with the Dow Jones industrials average down 220.4 points, or 2.5%, at 8,301.5. Hopes for a US and British walkover took a knock as US and British casualties mounted after fierce firefights.

In Europe, the FTSE-100 was down 98.6, or 2.5%, at 3,762.5, heading for a loss for the first time in over a week. Banks, insurers and telecoms sectors all fell, while oil stocks BP and Shell also lost ground despite a rise in crude prices.

Paris was down 1.9% and Frankfurt was 2.5% lower. The dollar slipped against major currencies and gold prices - refuges in times of uncertainty - rose more than $3 (£1.90) an ounce in early trading.

"As of last week progress had seemed fairly easy, but as we've heard over the weekend things are not going as well as we'd been expecting," Derek Mitchell, director of UK Equities at fund manager ISIS, told Reuters.

Nervousness replaced the elation of the buying spree last week that pushed shares up more than 17%. US and British troops suffered their heaviest combat casualties on Sunday in their campaign to topple the Iraqi leadership.

The fierce fighting dashed expectations of mass surrender of Iraqi troops, while US and British forces still faced resistance in the south, in areas that were supposedly overrun. Adding to jitters, Iraqi state television broadcast what it described as a live address by the Iraqi leader, Saddam Hussein, who pledged victory and urged Iraqis to "hit the enemies hard".

Stocks rallied across the world last week and oil prices plummeted as US-led forces made what appeared to be a textbook blitzkrieg start to their campaign, with US forces pushing deep into Iraqi territory. But today oil rose around 2% from its four-month low, with the price of Brent crude, a benchmark for world oil prices, up 60 cents to $24.95 a barrel.

Earlier, however, Tokyo's Nikkei stock average jumped 2.9% in a delayed reaction to gains late last week on Wall Street, as Japanese markets reopened after a holiday on Friday. The Nikkei rose 240 points to 8,435.

"There was a lot of optimism at the close of trading in New York on Friday that the war was going to be over very quickly and perhaps people even thought that it would be over during the course of the weekend," said Martin Mayne, associate director at NM Rothschild in Sydney.