Middle East conflict boosts oil and gold prices, drags down global stocks

Oil prices have jumped more than 4 percent, the US dollar edged up against the euro and global stock indexes eased as clashes between Israel and Hamas fighters raised fears that the conflict could spread beyond Gaza.

The conflict also lifted gold prices on Monday.

Israel's shekel weakened sharply. The dollar was last up 3 percent at 3.950 shekels.

The Bank of Israel earlier said it will 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 on Monday said its troops had killed armed infiltrators entering the country from Lebanon, raising concern the conflict could widen to a second front, two days after Hamas gunmen burst in from Gaza on a deadly operation.

US crude recently rose 4.37 percent to $86.41 per barrel and Brent was at $88.09, up 4.15 percent on the day.

The Dow Jones Industrial Average fell 13.86 points, or 0.04 percent, to 33,393.72, the S&P 500 lost 6.7 points, or 0.16 percent, to 4,301.8 and the Nasdaq Composite dropped 75.65 points, or 0.56 percent, to 13,355.69.

The pan-European STOXX 600 index lost 0.28 percent and MSCI's gauge of stocks across the globe shed 0.12 percent.

Jittery markets

"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.

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

The cash Treasury market is closed on Monday for Columbus Day, while 10-year Treasury futures rose.

Gold was also in demand, rising around 1 percent to $1,851 an ounce.

The conflict in the Middle East comes at a time when markets are jittery and bond yields around the world are at multi-year highs. Investors will be anxious to see US consumer price index data, due this week.

They also await the unofficial kickoff of the third-quarter US corporate earnings season, with results from JP Morgan and other banks due later this week.