The attacks on New York and Washington will have serious repercussions not just for the American people and the families who were affected but for the global economy as a whole.

The attacks, directed at the Pentagon in Washington as well as the twin towers in New York, were designed to strike at the very heart of American finance and defence.

The repercussions for the global economy are likely to be significant and the timing could hardly have been worse as the world stands on the brink of possible recession in the US, Europe and Japan, while equity markets have already suffered large sell-offs. There are serious questions too about the impact on global trade and foreign direct investment as well as tourism and consumer and business confidence. The death toll is likely to include large numbers of people from the financial services sector and the results will include a huge dent to business and consumer confidence, while oil prices have already started to escalate and equity markets to tumble.

Certainly a large portion of the tens of thousands of people employed in the twin towers were employed in financial services. Some of the biggest investment banks in the world, including Morgan Stanley Dean Witter among others, had offices there, according to Mr Jim Power, investment director at Friends First. The possible loss of expertise and the sheer displacement for the firms involved will have enormous ongoing implications.

The likely impact on US growth or confidence is almost impossible to predict accurately and much will depend on how the Bush administration reacts. A serious retaliation by President Bush will do serious damage to global trade and investment.

There is some speculation that the attacks have the resources of a state behind them and, as a result, any retaliation could result in full scale war.

Mr Power added that equity markets are likely to suffer substantially while US tourists are likely to cancel any plans for travel. Dr Dan McLaughlin, chief economist at Bank of Ireland, pointed out: "We saw in the Gulf War that Americans tend to pull up the shutters and circle the wagons."

US tourism will stop for some time and will have negative implications for short-term spending across the globe.

There are also questions about the likely impact on US business confidence and on US multinational operations outside North America. According to Mr Power there is likely to be some retrenchment in US foreign direct investment. Other commentators are even more worried and say that US firms may simply put off all international investment until the situation is clearer.

In the short term, there will be substantial implications for most stock markets. So far the market reaction has been to get out of equities and the dollar and into European bonds and oil. Prices moved sharply but volumes were quite light with most of the US institutions closed as well as Canary Wharf in London and many other banks and trading houses.

Short-term interest rates in Germany fell quickly to 3.75 per cent from around 4 per cent, while oil prices rose by around $3 a barrel, from $27.50 to $30.50. "Traders believe that any retaliation will involve the Middle East and could have a knock-on impact on oil prices," Dr McLaughlin noted.

"All points of US strength are being hit by terrorism and that makes the US dollar vulnerable," said Mr Jeremy Fand, head of global foreign exchange strategy at UBS Warburg. Further rises in oil prices would have a serious deflationary impact on the US economy in particular just as it appeared to be tottering on the brink of a possible recession. Prices are still well below the $40 high reached last year but that level could easily be seen again if the Middle East does erupt, according to Mr Power.

Domestically in the US, the news is even worse. There will be ongoing serious disruption to air travel while the insurance industry will be hard hit. But perhaps the most serious economic repercussion will be the dent which is almost inevitable to consumer confidence. In recent months it is only the US consumers' continuing determination to shop that has saved the economy from recession.

Over the past few weeks even that has looked to be in question as unemployment has risen to more than 4 per cent -- a sign that normally precedes a recession. If yesterday's events persuade consumers to stop spending then the economy is likely to tip over into recession.

That too will have an impact here. Already the Exchequer finances are in serious trouble with tax revenues only running 4 per cent ahead of last year, while Government spending is 24 per cent up. Further loss of revenue from tourism and possibly further retrenchment by the US multinational sector is the worst possible economic news in these circumstances.