SHANGHAI, Jan 8 (Reuters) - Financial markets were roiled on Wednesday after Iran fired missiles at U.S. forces in Iraq, sending Asian stocks and U.S. Treasury yields sliding and jolting oil prices higher as investors feared a wider conflict in the Middle East.
Futures in London briefly surged more than 5% to nearly US$72 a barrel as the Islamic Revolutionary Guard Corps claimed responsibility for the missile strikes, which the Pentagon said were launched from Iran.
However, stocks trimmed some earlier losses in the afternoon after a tweet from Iranian Foreign Minister Mohammad Javad Zarif stating, "We do not seek escalation or war, but will defend ourselves against any aggression", and U.S. President Donald Trump suggested damage from the attacks was limited.
Crude markets have a comfortable supply cushion should there be a disruption.
Saudi Arabia's state tanker operator Bahri temporarily suspended transits through the Strait of Hormuz, the Wall Street Journal reported.
OANDA Europe's senior market analyst Craig Erlam said the sustained surge in gold price was not surprising because safe havens, like gold, tend to perform solidly in times like these while stocks and other risky assets take a beating. Tehran has vowed retaliation for the killing of Iranian military commander Qassem Soleimani by a US air strike on January 3.
Iraq's military said there were no casualties among its forces.
Oil surrendered some hefty gains as many doubted Iran would strike back in a way that would disrupt supplies and its own crude exports.
"Oil markets could see another jump, depending on how the USA responds".
"We are getting exaggerated moves but that's of course volatility playing".
The buying of gold and oil also eased as the trading session wore on - Brent crude futures which had shot to $70 per dollar, were last up 0.5% at $68.1 per barrel.
Oil climbed much higher on the news, with the WTI benchmark leaping a whopping 4.53 percent to $ 65.54 a barrel before settling somewhat.
Oil prices have risen to varying degrees immediately following many of those events - including almost 20% after the September attacks on Saudi oil facilities - but they've always dropped quickly.
"The risk of further escalation has clearly gone up - given the direct attack on Iran, Iran's threat of retaliation and Trump's desire to look tough - posing the threat of higher oil prices", said Shane Oliver, chief economist at AMP Capital.
Trump is expected to make a statement later on Wednesday. The new head of Iran's Quds force, which Soleimani led, has pledged to remove USA from the Middle East.
The unrest has yet to impact oil supplies, analysts said.
Opec is sitting on huge amounts of spare capacity after reducing supplies for most of the past three years and the United States, the world's largest crude producer, recently reported its second consecutive month as a net petroleum exporter.
Currencies sensitive to global risk appetite were weaker, including the Australian dollar, New Zealand dollar and Swedish crown.