WASHINGTON -- Moments after the U.S. attack on Iraq and Kuwait flashed on television reports, oil prices soared rapidly last night, rising $8 a barrel, to $40, in cash trading in the oil states of Texas and Louisiana before settling back to $37.
In an early sign that steep increases in oil prices worldwide are likely when markets open today, oil prices for March delivery opened sharply higher in Tokyo this morning, rising to $33.75, an increase of $3.46 from the closing price in New York yesterday.
In Singapore, the benchmark Brent Blend crude was up $4.30 at $33.50 a barrel.
"We're going to see a sharp surge in prices" in New York and world markets today, said Ann-Louise Hittle, an oil expert at Shearson Lehman Brothers Inc.
Energy analysts said oil prices could rise as high as $50 to $65 a barrel in a prolonged war.
But in view of the substantial surplus supplies in the global market, experts said prices will quickly tumble once hostilities end if no damage is done to the oil fields and pipelines in the Middle East.
The Tokyo stock exchange, often a barometer of market moves world-wide, dropped slightly in early quiet trading after falling in previous days in response to the prospect of war.
The 225-share Nikkei Stock Average shed 332.51 points, or 1.48 percent, in the first half-hour of trading but later rebounded to 22,435.07, down 7.63 points, or 0.41 percent.
By the time the United States opened its barrage, the Tokyo market apparently had already discounted the impact of the war.
"Market players are trading calmly," said Nobuyuki Fujiki, a trader for Nikko Securities quoted by the Associated Press. "There was no panic selling at all."
The dollar, often a haven in times of crisis, jumped in Tokyo in opening trading but then settled back, ending the day at 136.60 yen, down slightly from 136.80 at the New York close yesterday.
The trading in the dollar was light as currency dealers expressed uncertainty about how to react to the outbreak of the war.
The attack came after the close of U.S. markets, but most traders said they had expected war.
In oil trading in Houston and New Orleans, the price of crude leaped dollars at a time from the New York Mercantile Exchange closing price of $32 a barrel.
After reaching $40 a barrel, the price settled back to $37 a barrel, still about $5 higher than it had been before the U.S. attack on Iraq.
Oil companies were making deals outside the regulated energy markets last night in what is known as the cash market.
The Commodity Futures Trading Commission, which regulates the New York exchange, kept an eye on Asian trading last night but expected to make no changes in U.S. trading today, said spokesman David Geary.
"This took everyone by surprise," he said. "We're watching the Japanese market now and seeing how they're reacting to it."