Libya violence roils markets

World financial and commodity markets are in turmoil as escalating violence in Libya looked likely to overthrow a third North African and Arab dictatorship in less than two months.

However, Muammar Gaddafi, showing his defiance, appeared on state television early on Tuesday denying reports he had fled to Venezuela.

"I am in Tripoli and not in Venezuela," he said, under a large umbrella, leaning out of the front seat of a van.

Reuters reports that armed forces loyal to Gaddafi have fought an increasingly bloody battle to keep him in power with residents reporting gunfire in parts of the capital Tripoli.

State TV showed government supporters rallying and Gaddafi's son Saif al-Islam Gaddafi said warplanes had hit only ammunition dumps. He did not say why jets had carried out the air strikes, but on Sunday he accused protesters of raiding ammunition depots in the eastern city of Benghazi.

Anti-government protesters are reported to have taken control of key parts of eastern Libya, disrupting oil exports and sending prices to a two and a half-year high. Though trading in New York was affected by the Presidents' Day holiday, the April futures contract jumped 6.3% – the most this year – to $US95.39 a barrel. In London, Brent crude topped $US107.93.

Demonstrations continued to spread across the Middle East and North Africa, a region that accounts for 36% of global crude output. Chinese authorities blocked foreign news reports on protests across the country to stamp out any movement toward pro-democracy revolts. The death toll is said to be in the hundreds and rising.

Key commodities are also rising. Gold climbed to as high as $US1408.45 an ounce and is in its the longest rally since August. Silver rose to a 30-year high of $US33.8925 an ounce.

Violence has also flared in Bahrain, Yemen, Djibouti and Iran as governments sought to crack down on demands for change.

Ratings downgrades
Ratings agencies have downgraded both Libya and Bahrain. Fitch Ratings downgraded Libya’s credit rating to BBB from BBB-plus and warned that a further downgrade could be in store. It says the move “reflects the eruption of political risk evidenced by the increasing momentum of the popular uprising aimed at ending Muammar Gadhafi’s 42-year rule.” Oil-rich Libya is the sole Fitch-rated sovereign that has no government debt.

Meanwhile, Standard & Poor’s has lowered Bahrain’s long- and short-term sovereign ratings one notch to A-/A-2. S&P has also downgraded Bahrain’s central bank and sovereign wealth fund, Mumtalakat Holding Co, which operates the national carrier Gulf Air.

A huge anti-government march in Tripoli on Monday afternoon came under attack by security forces using fighter jets and live ammunition, witnesses told Al Jazeera. Libyan authorities have cut all landline and wireless communication in the country, making it impossible to verify the report.

If Gaddafi is ousted from power, it will end a 41-year dictatorship by a man labelled the “mad man” of Libya. It will also end his unfulfilled dream of a pan-Arab socialist republic, which over time he has also sought to involve Egypt, Tunisia and Syria.

During his period in power, Gaddafi has:

• been responsible for the bombing of a Berlin nightclub in 1986, killing two US soldiers, and the Lockbie bombing of an American airliner in 1988, killing all on board

• opposed the Camp David peace accords between Egypt and Israel

• unsuccessfully tried to form a “united states of Africa”

• supported the terrorist movements in Northern Ireland and Colombia with weapons

• broke ties with Switzerland and most of the EU after his son was arrested in Geneva on charges of abusing two domestic servants

• has wooed hundreds of young Italian women with substantial cash enticements to convert to Islam during “cultural visits” to Libya, inspiring Italian Prime Minister Silvio Berlusconi to stage his own “bunga bunga” parties with starlets and strippers

• was revealed in the Wikileaks US cables to have a “voluptuous Ukrainian nurse” who follows him everywhere