The price of oil spiked Wednesday after Iran launched revenge attacks on US forces in Iraq, making good on its pledge to hit back over the killing of its top general.
The main US contract rocketed by more than 4.5 percent as fears over supplies in the tinderbox Middle East sent prices soaring.
The Pentagon said it was still “working on initial battle damage assessments” after bases at Ain al-Asad and Arbil in Iraq — which house US and coalition forces — were targeted by more than a dozen ballistic missiles.
There were no immediate reports on casualties. US President Donald Trump said the assessment was underway, but added on Twitter: “So far, so good”.
Iranian Foreign Minister Mohammad Javad Zarif said on Twitter that Tehran had “concluded proportionate measures in self-defence”.
“We do not seek escalation or war, but will defend ourselves against any aggression.”
West Texas Intermediate and Brent Crude later pared their gains. At around 0300 GMT WTI sat at $63.63 up 0.93 percent, and Brent was at $69.34, 1.10 percent up.
Oil markets have been unsettled since Friday’s killing in a US drone strike of Iranian general Qasem Soleimani, one of the most important figures in the country’s government.
The assassination sparked an outpouring of rage and grief in Iran, along with a growing drumbeat of threats of revenge, and warnings of a possible war that could engulf much of the Middle East.
Safe haven assets also rose Wednesday as investors dumped stocks and headed to the hills.
Gold was up more than two percent, surging above $1,600 an ounce for the first time in six years, before falling back slightly.
The Japanese yen, where investors traditionally take refuge in times of uncertainty, was also up, adding fuel to the fire in Tokyo, where the Nikkei 225 index plunged more than 2.5 percent in early trade.
“It’s not going to be pretty today,” said AxiTrader’s Stephen Innes.
However, a possible market rout faded as Asian bourses got going in earnest, with early declines slowing.
By around 0300 GMT, the Nikkei was off 2.3 percent, Sydney was down 0.43 percent and Shanghai’s main index had shed 0.34 percent.
In Tuesday trade, US stocks had finished slightly lower while European markets were broadly flat — Frankfurt outperforming its peers with a 0.8-percent gain.
Tokyo – Nikkei 225: DOWN 2.3 percent at 2,215.32 (break)
Hong Kong – Hang Seng: UP 0.3 percent at 28,322.06
Shanghai – Composite: DOWN 0.4 percent at 3,091.96
Brent Crude: UP 1.10 cents at $69.34 per barrel
West Texas Intermediate: UP 86 cents at $63.63
Pound/dollar: UP at $1.3134 from $1.3126 at 2140 GMT
Euro/pound: DOWN at 84.93 pence from 84.98 pence
Euro/dollar: UP at $1.1159 from $1.1193
Dollar/yen: DOWN at 108.40 from 108.44 yen
New York – Dow: DOWN 0.4 percent at 28,583.68 (close)
London – FTSE 100: DOWN 01.4 percent at 7,573.85 (close)