By Shiyin Chen and Saeromi Shin Feb. 22 (Bloomberg) -- Oil climbed to the highest level in more than two years and bonds rose, while Asian shares and U.S. stock futures declined as violence intensified in Libya. The New Zealand dollar weakened following an earthquake in Christchurch. Crude for April delivery surged 8.4 percent from the Feb. 18 close in New York to $97.28 a barrel at 3 p.m. in Tokyo. The MSCI Asia Pacific Index lost 1.9 percent. Standard & Poor’s 500 Index futures sank 1.2 percent from last week. New Zealand’s dollar fell against all 16 major peers. Ten-year Treasury yields dropped to the lowest level in two weeks. The cost of insuring Japanese debt against default increased after Moody’s Investors Service changed the nation’s debt-rating outlook to negative. Libya, holder of Africa’s largest oil reserves, erupted into violence last night, with al-Jazeera reporting that at least 250 people died in Tripoli alone. Turmoil in the Middle East may intensify inflation concerns and spur policy makers to “tighten incrementally more than they otherwise would have,” according to Goldman Sachs Group Inc. strategist Timothy Moe. “The Middle East issue is affecting sentiment today as investors grapple with uncertainty whether the political instability will spill over across the region,” said Im Jeong Jae, a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which oversees $28 billion of assets. West Texas Intermediate oil for April delivery earlier rose as much as 9.8 percent. The less actively traded March contract, which expires today, gained 8.5 percent to $93.48 a barrel. Brent crude for April delivery rose 1.8 percent to $107.60 a barrel on the London-based ICE Futures Europe exchange, extending yesterday’s 3.1 percent jump. Price Pressures Japanese Finance Minister Yoshihiko Noda said today in Tokyo he’s monitoring how the turmoil in the Middle East affects crude oil and raw material costs. European Central Bank policy makers signaled yesterday they may support raising interest rates in coming months as the economy recovers and imports fuel price pressures. Zinc tumbled 3.2 percent to $2,514 a metric ton on the London Metal Exchange amid concern accelerating inflation will support the case for further tightening in China. Lead slumped 1.7 percent, and tin declined 1.4 percent. Middle East stocks dropped yesterday, with benchmark indexes for Dubai, Tunisia and Morocco losing more than 1 percent each, as Libya become the focal point of protests that have spread to Yemen, Djibouti, Iran and Bahrain. Libyan leader Muammar Qaddafi said in comments broadcast on state TV that he hadn’t fled the country as diplomats resigned and soldiers deserted in protest over a crackdown that has left hundreds dead. U.S. Secretary of State Hillary Clinton called for a stop to the “unacceptable bloodshed.” Builders, Airlines More than nine stocks fell for each that gained on MSCI’s Asian index, which was on course for its largest slump since Jan. 20. Benchmark indexes retreated in all regional markets. Hyundai Engineering & Construction Co., a South Korean builder that gets about 38 percent of its sales from the Middle East, tumbled 9.7 percent. Korean Air Lines Co. dropped 10 percent while Air China Ltd. lost 7 percent, leading airlines lower on concern rising fuel costs will erode profits. BHP Billiton Ltd., the world’s biggest mining company, advanced 1.6 percent after agreeing to buy Chesapeake Energy Corp.’s Fayetteville assets in central Arkansas for $4.75 billion in cash, entering the U.S. shale gas business. U.S. index futures indicate that shares may decline when markets resume trading today after the President’s Day break yesterday. The S&P 500 gained 1 percent last week, its third consecutive weekly rally. Moody’s Downgrade Japan’s Nikkei 225 Stock Average sank 1.8 percent. The Markit iTraxx Japan index advanced three basis points to 84.5 basis points, according to Citigroup Inc. prices after Moody’s changed the nation’s credit-rating outlook to negative from stable, citing the risk that the government won’t do enough to its tackle debt burden. The rating stands at Aa2. The cost of protecting New Zealand sovereign bonds from default jumped the most in almost three months after a 6.3 magnitude temblor hit the city of Christchurch. Credit-default swaps gained 5 basis points to 66 basis points, according to Australia & New Zealand Banking Group Ltd. prices. The kiwi slumped 1.8 percent to 75.01 U.S. cents. Australia’s dollar, known as the Aussie, fell 0.7 percent to $1.0025 and the South Korean won lost 0.9 percent to 1,127.60 per dollar as tensions in the Middle East sapped demand for higher-yielding assets. Risk Aversion “Given the tensions that are still prevalent in the Middle East and North Africa, we probably should still see some risk- aversion trades,” said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. The yen was stronger against 12 of its 16 major peers, and traded at 113.25 per euro from 113.73 yesterday. while the Dollar Index, which tracks the U.S. currency against those of six trading partners, rallied 0.5 percent. Yields on 10-year Treasuries fell seven basis points to 3.52 percent. Japan’s 10-year yields dropped four basis points to 1.265 percent, and Australia’s slid four basis points to 5.59 percent. --With assistance from Ben Sharples in Melbourne, Sarah McDonald in Sydney, Yoshiaki Nohara in Tokyo and Katrina Nicholas, Wes Goodman and Ron Harui in Singapore. Editors: Darren Boey, James Poole To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net. To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net.

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