Governments worldwide from South Korea to the United States are beginning to count the cost of war on Iraq.
As early market euphoria over a swift victory faded, an Australian central bank board member said the US led-war to oust Iraqi President Saddam Hussein could sap the strength of the global economy for years to come.
Mr Warwick McKibbin said the war was amplifying uncertainty that had been dampening confidence for months. In the worst case, he said, it could reduce world growth by 0.75 per centage points a year for three years.
South Korea today postponed indefinitely a plan to issue $1 billion in 10-year bonds because of unfavourable market conditions. The proceeds would have paid off a bond falling due next month.
In the United States, President Bush told lawmakers last night he urgently needed $75 billion to pay for the military campaign in Iraq and to reward key allies supporting the war effort.
US light crude oil prices rose 35 cents to $29.01 a barrel, while most Asian share markets took their cue from a 3.6 per cent drop in the Dow Jones industrial average and slithered lower.
Tokyo's benchmark Nikkei stock market average fell 2.33 per cent to 8,238.76 despite steps by the Bank of Japan (BOJ) to cushion banks from the fallout of the war on Iraq.
The BOJ also said it would provide as much cash as needed to keep the Iraq war from destabilising the banking system.
"The forecast of a short war was more of an equivalent to a buying recommendation on Enron," said Mr John Stuermer, head of global high-yield bond research at Bear Sterns in Hong Kong.