Stock markets slid and oil prices jumped Friday on worries that an expected ground invasion of Gaza by Israel would spark a wider conflict in the crude-rich Middle East.
Risk aversion was compounded by US Federal Reserve boss Jerome Powell, who signalled a pause in interest rates at the bank’s next meeting but left open the prospect of a later hike.
Wall Street moved lower from the opening bell while Europe’s main stock markets closed down more than one percent.
Brent North Sea crude, the international benchmark, was up one percent at more than $93 per barrel.
Gold, a go-to haven asset in times of uncertainty, hit close to $2,000 an ounce.
“It has been a tumultuous and eventful week for the global financial markets,” said Fawad Razaqzada, market analyst at City Index and Forex.com.
“The ongoing situation in the Middle East has triggered a surge of volatility in the oil and stock markets, compelling investors to re-evaluate their strategies and shift their focus from riskier assets to ‘safer’ investments,” he wrote in a note.
That has in particular led to a rush into gold.
“Gold’s safe-haven status has been questioned on a number of occasions over recent years, but times like this highlight that in times of significant uncertainty, traders look for assets with a track record,” said market analyst Craig Erlam at OANDA.
Hamas carried out a deadly attack on Israel from the Gaza Strip on October 7, and killed at least 1,400 people, mostly civilians who were shot, mutilated or burned to death, according to Israeli officials.
In response, Israel launched a relentless bombing campaign on Gaza. More than 4,100 Palestinians, mostly civilians, have been killed, according to the latest toll from the Hamas-run health ministry.
Traders are also wrestling with the prospect that US interest rates will remain elevated for some time as the Fed battles to contain inflation.
On Thursday, Powell suggested decision-makers would not hike rates at their next meeting at the end of October but left the door open to more tightening down the line.
News that weekly jobless claims in the United States came in lower than expected, suggesting the labour market was tighter than many predicted, dealt a blow to traders’ confidence.
“Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell told a conference in New York.
Additional evidence of “persistently above-trend growth” or fresh signs of tightness in the labour market “could warrant further tightening of monetary policy”.
Investors have also tracked the yield on the 10-year US Treasury note, seen as a proxy for US interest rates, which stood just below five percent on Friday after briefly hitting that level for the first time since 2007 a day earlier.
In Britain, the yield on 30-year government bonds rose to their highest since 1998 at 5.16 percent.
In currency markets, the dollar was close to topping 150 yen after surpassing the psychological level at the start of October for the first time in a year.