LONDON (AFP) - The price of oil held above the 50-dollar-a-barrel mark unsettling financial markets, particularly in Asia, which were shaken by threats to crude supplies and left wondering how far the price spike would go.
"What the (stock) markets are concerned with now is whether the current oil shock will spoil the party," Nomura Securites analyst Anais Faraj said.
"Oil at 50 dollars per barrel is expensive by any measure, and the impact is likely to become visible over the winter season when demand picks up.
"However, the real issue in our mind is whether oil corrects again. Some analysts are targeting prices near 60 dollars per barrel.
"That is possible, but looks very aggressive in our view and would probably bring in a period of sub-par growth," Faraj added.
On Tuesday world oil prices hit fresh record high points above 50 dollars per barrel in electronic trading ahead of formal pit deals.
In New York the price of light sweet crude for November delivery climbed to an all-time peak of 50.47 dollars per barrel, the highest level since oil began trading on the New York market in 1983.
Crude oil futures smashed the 50-dollar barrier for the first time in after-hours New York trading on Monday.
Prices soared on factors including unrest in major oil producers Nigeria and Saudi Arabia, recent hurricanes in the United States, continued violence in Iraq and the legal and supply woes of Russian energy giant Yukos, analysts and traders said.
That sent world markets reeling, notably in Asia.
Tokyo's Nikkei-225 index closed down 0.40 percent at 10,815.57 points on Tuesday, while Hong Kong's Hang Seng Index fell 0.55 percent to 12,950.80.
On the foreign exchange market yen, which is particularly sensitive to high oil prices since Japan is a 100-percent net importer of crude, fell heavily against the dollar and euro.
"Whatever happens to oil, the foreign exchange market has latched onto the notion that while the United States and Japan are likely to suffer the biggest fallout from an escalated oil price, Japan comes off worst," Commerzbank Securities analysts said.
"Underlining that sentiment is the risk of associated lower growth in Asia and China in particular, and what this will mean for Japanese exports. That is coupled with the knowledge Japan imports all of its oil."
The dollar was being traded at 111.56 yen in afternoon European dealing against 111.25 late on Monday in New York. The euro rose to 137.28 yen against 136.78.
Europe's main stock markets shrugged off the threat of soaring crude prices, reversing early losses.
The London FTSE 100 index rose 0.64 percent to 4,570.10 points, with strength in mining and energy stocks helping to counter earlier concerns, dealers said.
The Frankfurt DAX 30 edged up 0.07 percent to 3,877.0 points and the Paris CAC 40 climbed by 0.41 percent to 3,671.75 points.
European government bonds meanwhile traded slightly lower.
"The bond market is just losing a bit of momentum at the moment as it consolidates a little," Canadian Imperial Bank of Commerce economist Audrey Childe-Freeman said.
The yield on the 10-year German government bond eased by 0.02 percentage points to 3.42 percent. Bond yields and prices move in opposite directions.
On Wall Street, the Dow blue-chip index tumbled below 10,000 points on Monday on worries about an earnings squeeze and the potential for an economic slowdown caused by higher crude prices.
The Dow Jones Industrial Average slumped 0.58 percent to 9,988.54 points, the Nasdaq composite sank 1.04 percent to 1,859.88 points and the broad-market Standard and Poor's 500 index dipped 0.59 percent to 1,103.52.
Meanwhile, gold benefited from its status as a safe haven with investors switching to the precious metal fearing a surge in oil prices will weigh on global economic growth.
The price of gold climbed to 410.65 dollars on Tuesday from 409.20 late on Monday.