Crude oil prices rebounded this week in New York to post their biggest gain in a year with the contract for May delivery closing at just over $30 a barrel. The 12 percent rise in oil this week is tied to a belief that the Iraq war will last longer than first expected.
Oil traders say it will be longer than had been expected before Iraqi crude is again flowing onto world markets. In just five days the oil price has rebounded from $25 a barrel back to $30. And there is caution about future price trends.
Equity markets moved in the opposite direction. The war rally that began in mid-March came to an abrupt halt. This week the Dow Jones Industrials were down four days out of five and the index lost 4 percent on the week.
"Over the weekend we found out that the war turned out to be less unconventional then had been put forth. And I think that brought everybody back to bear. Obviously, there was concern about seeing prisoners of war on television. So we had 225 rally (3-21) that by Monday had turned into a 325 point sell off (3-24). Since then we've had this kind of internal debate. We have a kind of Iraq paralysis going on," said Art Cashin, the chief floor trader at Paine Webber in New York. Speaking on CNBC television, he said the celebratory rally turned into an Iraq paralysis.
The dollar was battered on world currency markets, enduring its biggest weekly loss against the euro in eight months. The euro rose to just under one dollar eight cents. The dollar over the week lost nearly 3 percent against the euro, the currency used by 12 West European nations.