Global impact of Israeli war on Gaza: Markets slump, oil and gold soar

Oil prices jumped more than 4 percent, gold gained and the US dollar edged up against the euro as military clashes between Israel and the Palestinian group Hamas fuelled worries that the conflict could spread beyond blockaded Gaza.

Emerging market stocks fell on Monday, while major US stock indexes were slightly higher in early afternoon New York trading, recovering from losses earlier in the day.

Israel's shekel weakened sharply. The dollar was last up 2.9 percent at 3.951 shekels. The Bank of Israel earlier said it would sell up to $30 billion of foreign currency to maintain stability. Israeli government bonds also fell, with the 2120 Hundred Year bond down 5.3 cents on the dollar at a record low.

Israel bombarded the Palestinian enclave of Gaza in retaliation for one of the bloodiest attacks in its history, unleashing fears of a wider Middle East conflict.

Hamas fighters killed over 900 Israelis and abducted dozens more as they attacked Israeli towns on Saturday. It was the deadliest incursion into Israeli territory since Egypt and Syria's attacks in the Yom Kippur War 50 years ago.

Safe-haven gold

US crude rose 4.46 percent to $86.48 per barrel and Brent was at $88.04, up 4.09 percent on the day.

"Typically the most sensitive asset classes to geopolitical risk are emerging markets, commodities and currencies — and, true to form, we've seen hits in all of those areas," said Tina Fordham, geopolitical strategist and founder of Fordham Global Foresight.

Emerging market stocks lost 0.21 percent, while safe-haven gold was in demand, rising around 1.2 percent to $1,852 an ounce.

On Wall Street, the Dow Jones Industrial Average rose 58.97 points, or 0.18 percent, to 33,466.55, the S&P 500 gained 7.94 points, or 0.18 percent, to 4,316.44 and the Nasdaq Composite dropped 6.80 points, or 0.05 percent, to 13,424.54.

The pan-European STOXX 600 index lost 0.26 percent and MSCI's gauge of stocks across the globe gained 0.11 percent.

"The market at this point has focused on the diplomatic efforts to keep Israel focused on Hamas and reduce the prospect of escalation.

"There's an all-out global diplomatic effort to keep this conflict from expanding into the oil-rich region," said Quincy Krosby, chief global strategist, LPL Financial in Charlotte, North Carolina.

"We don't see a 'sell now, ask questions later' market," he said.

Against the dollar, the euro fell 0.4 percent to $1.0544.