Prices of oil jump on concerns that Iran might respond to the killing of its top general Qasem Soleimani by the United States by disrupting global supplies of energy from the Mideast.
Oil prices jumped nearly $3 a barrel and gold, the yen and safe-haven bonds all rallied on Friday, after the US killing of Iran's top military commander in an air strike in Iraq ratcheted up tensions between the two powers.
Traders were clearly spooked after the death of Iranian Major-General Qasem Soleimani, head of the elite Quds Force and one of the country's most influential figures, and a vow by Iranian Supreme Leader Ayatollah Ali Khamenei of "revenge."
The Middle East-focused oil markets saw the most dramatic moves with Brent crude futures leaping as much 4.5 percent to $69.20 a barrel, their highest since September, though the impact was felt across almost every asset class.
Europe's STOXX 600 and Wall Street futures both fell around 1 percent as New Year optimism evaporated. The yen rose half a percent to the dollar to a two-month high and the Swiss franc hit its highest against the euro since September.
"Geopolitics has come back to the table, and this is something that could have major cross-asset implications," said Lombard Odier's chief investment strategist, Salman Ahmed.
"What is critical is how it pans out in the next few days," Ahmed said.
"Whether it turns into a theme depends on Iran's reaction and then the US response."
Soleimani's Quds Force and its paramilitary proxies, ranging from Lebanon's Hezbollah to the PMF in Iraq, have ample means to mount a response.
In September, US officials blamed Iran for a missile and drone attack on oil installations of Saudi Aramco, the Saudi state energy giant and world's largest oil exporter.
The Trump administration did not respond, beyond heated rhetoric and threats, and markets settled down within a week.
But Friday's attacks saw governments, including the US, urging citizens in the region either to return home or to stay away from potential targets and public gatherings.
US Secretary of State Mike Pompeo said in a round of TV interviews that the United States remained committed to de-escalation with Iran but that it had needed to defend itself.
With around an hour to go before the start of Wall Street trading, Dow, S&P 500 and Nasdaq futures were down between 1 percent and 1.2 percent despite the jump in crude pushing oil majors like Exxon Mobil and Chevron.
Scramble to safety
German Bunds and US Treasuries — the world's benchmark government bonds and typically seen as the safest assets — caught a bid, too.
"Markets still remain quite thin after the holidays, but even in a regular session we would have seen a similar reaction," said Christian Lenk, a rates strategist at DZ Bank in Frankfurt, referring to the Middle East-sparked drop in yields.
Most of the international community called for de-escalation.
Back in the markets, gold, the other traditional refuge for risk-averse investors, rose 1 percent to a four-month high of $1,545. For the week, it has gained about 2 percent and is heading for a fourth consecutive weekly increase.
"After the recent escalations in geopolitical issues, we see a resistance level near the $1,575 level for the next week," said Jigar Trivedi, a commodities analyst at Anand Rathi Shares & Stock Brokers in Mumbai.