The impact of fears of a longer war could be "disproportionate"

SINGAPORE, March 24 (IslamOnline.net & News Agencies) - Oil prices climbed, the U.S. dollar tumbled and stock markets were mixed Monday, March 24, amid signs the U.S.-led invasion of Iraq could be longer and more difficult than earlier expected.

Fiercer-than-expected Iraqi resistance less than a week into the war have brought back caution to the world's markets, which had earlier rallied on hopes of a quick end to the conflict, Agence France-Presse (AFP) said.

The United States suffered its biggest blow of the Iraq war Sunday, March 23, when film of dead bodies and five captured U.S. soldiers was shown by Iraqi television.

Oil prices rose by as much as 2.85 percent early Monday after the images were shown and U.S.-led forces suffered their biggest battlefield casualties in the campaign so far, before easing in the later hours.

The benchmark New York light sweet crude contract for May delivery was trading at 27.42 dollars a barrel at 2:30 pm (0630 GMT), up 51 cents from its close in New York Friday. It reached an intraday high of 27.70 dollars a barrel.

"The war in Iraq could take longer than expected," DBS Bank said in a market commentary.

"It is now becoming clear that the war could drag on longer than expected," a dealer with a Singapore-based oil major said. "There are still plenty of surprises as the conflict goes on."

An economic research report by Societe Generale said the market's scenario was for a short war with no major damage to oil production and export capacities in the Gulf region.

"Since this is the most optimistic scenario, all others are inevitably more pessimistic, and as such contain much higher price levels," it said, warning the impact of fears of a longer war could be "disproportionate."

News from the battlefield also pulled the dollar lower against the yen and euro.

The greenback fetched 121.00-04 yen at 2:00 pm (0500 GMT) down from 121.65-75 yen in New York on Friday afternoon.

The euro was quoted at 1.0601 dollars up from 1.0520-0530 dollars Friday, March 21, afternoon in New York.

"Last week we saw the dollar go higher due to expectations for a short war," said Toru Umemoto, currency strategist for Morgan Stanley.

"But over the weekend we have seen some strong resistance by Iraq and also several U.S. soldiers have been captured by Iraqi troops," he said.

"This pessimism fuelled a decline in the dollar."

Stock markets were mixed amid continued hopes that the United States' overwhelming firepower would ultimately prevail.

Japanese share prices surged 2.93 percent Monday with expectations of a speedy end to the war in Iraq remaining intact despite resistance from Iraqi forces, dealers said.

The Nikkei-225 average of the Tokyo Stock Exchange jumped 240.02 points to end the day at 8,435.07.

Australia's key SP/ASX 200 index closed 0.29 percent lower at 2,858.5 points while South Korea's composite index ended down 1.03 percent at 569.85.

The Hang Seng index in Hong Kong closed morning trade 0.15 percent higher at 9,193.39 points but Singapore's Straits Times index finished the early session down 1.21 percent at 1,310.16.