Oil gains, bond prices inch up on Turkey-Russia tensions

NEW YORK: Oil prices jumped and government debt prices edged up on Tuesday after Turkish jets shot down a Russian warplane near the Syrian border, adding to worries about tensions in the Middle East.

U.S. stocks and a world stock index erased early losses to trade slightly higher by late afternoon as energy shares rallied, while the dollar fell against the traditionally safe-haven Japanese yen, helping to push gold higher.

Investors have been on edge about chance of more terror incidents following the Nov. 13 attacks in Paris.

Travel and leisure stocks fell after the U.S. State Department late on Monday warned U.S. citizens of the risk to worldwide travel posed by what it called increased terrorist threats.

Shares of United Continental , American Airlines and Delta Air Lines all were lower.

The warplane incident was the first time a NATO member's armed forces had shot down a Russian or Soviet military aircraft since the 1950s. Russia said its plane had been downed over Syria.

"This has really gotten investors' attention," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. "Investors are worried that tensions could escalate."

Oil prices hit two-week highs, with Brent futures rising 2.9 percent to settle at $46.12 a barrel and U.S. crude gaining 2.7 percent to settle at $42.87.

U.S. stocks edged up, led by gains in energy shares, which jumped along with oil. The S&P energy index <.SPNY> was up 2.4 percent.

The Dow Jones industrial average <.DJI> rose 51.08 points, or 0.29 percent, to 17,843.76, the S&P 500 <.SPX> gained 5.76 points, or 0.28 percent, to 2,092.35 and the Nasdaq Composite <.IXIC> added 2.45 points, or 0.05 percent, to 5,104.93.

The MSCI index of global stock markets <.MIWD00000PUS> was up 0.1 percent, reversing early losses, while a broad gauge of European stocks <.FTEU3> ended down 1.3 percent.

Turkish shares <.XU100> dropped as well, while the prospect of escalating tension between NATO and Russia gave an additional push lower to German yields.

In U.S. Treasuries trading, the 30-year yield hovered near 3 percent, while benchmark 10-year Treasury notes were up 5/32 in price to yield 2.232 percent.

DOLLAR FALLS

The dollar index <.DXY>, which measures the dollar against six major world currencies, fell 0.2 percent. Against the Japanese yen , the currency fell to 122.48 yen, off 0.4 percent.

Gold rose, recovering from near six-year lows after news of the plane's downing. Spot gold peaked at $1,080.51 and was up 0.7 percent at $1,077.30 an ounce.- Reuters