Stock markets surged higher Monday as investors rushed to take positions ahead a looming war against Iraq after the United States said the window for diplomacy had closed.

Investors appear to be betting that a war would be short and that the U.S. economy would rebound quickly once hostilities cease.

They will learn more this evening when U.S. President George Bush speaks on television at 20:00 ET. He is expected to deliver a final ultimatum to Saddam Hussein.

Earlier on Monday, U.N. Secretary General Kofi Annan said the weapons inspection process in Iraq is over. The U.N. is pulling all of its people out of Baghdad.

Canada will not participate in a war on Iraq that does not have the support of the U.N. Security Council, Prime Minister Jean Chretien said.

In Toronto, the S&P/TSX composite index closed up 102.14 points at 6,406.63.

All of the TSX groups closed higher. There were solid gains in the information technology, which jumped 2.92%, and financial services, which rose 2.2%.

Shares of Research In Motion rose $1.20 to $20.20 after the maker of the BlackBerry e-mail device said it had struck a licensing deal with Taiwan’s High Tech Computer Corp.

Nortel Networks jumped 13¢ to C$3.25.

In financial stocks, Royal Bank rose $1.16 to $57.71.

Toronto volume was 173.3 million shares worth $2.16 billion. Declines narrowly led advances 533 to 527 with 224 unchanged.

Small cap stocks were left out of today’s rally. The junior TSX Venture Exchange slipped 9.10 points to 1,060.46.

In New York, the Dow Jones industrial average soared 281.58 points higher to 8,141.29, while the Nasdaq composite index jumped 51.12 points to 1,391.45. The broad S&P 500 climbed 29.52 points to 862.79.

Short covering continued to fuel the market’s advance since the middle of last week, traders noted. Short sellers — investors who sell borrowed stock and hope to buy it back later at a lower price — covered their bets that the market would head south by buying shares as the market climbed.

The Canadian dollar fell almost a third of a cent against the U.S. greenback. The loonie shed 0.32¢ to close at US67.56¢.

It had been trading higher during the morning after Statistics Canada reported that the index of leading economic indicators showed its biggest rise in seven months.

Investors are hoping that a war with Iraq will result in the same kind of bounce that greeted the onset of the 1991 Persian Gulf war.

Back then, the Dow rose almost 5% on the first day of trading following the outbreak of hostilities and was up better than 13% six months later.

The Nasdaq composite index gained almost 3% on that first post-attack trading day and was 35% higher six months after that.

The Toronto Stock Exchange also posted notable gains during the conflict. The TSE 300 rose 1.2% in the first trading day following the onset of the war and was up almost 12% six months later.