New York: Stock markets around the world slumped, crude oil prices surged and the dollar gained on Friday as images of escalating violence and chaos in Egypt gripped investors and raised concerns the protests will spread across the Middle East.
Money managers, who in recent months had been accelerating moves into riskier assets, dumped stocks and piled into safe-haven investments like US Treasuries, the dollar and gold as non-stop media coverage of skirmishes between protesters and Egyptian police overwhelmed all other news.
Wall Street's benchmark S&P 500 index suffered its biggest one-day loss in six months.
Some said the sudden eruption of violence could spur a longer-term sell-off after a strong rally in riskier assets like stocks and emerging markets.
"I think the next two to three weeks, the crisis in Egypt and potentially across the Middle East might be an excuse for a big sell-off of five per cent to 10 per cent," Keith Wirtz, president and chief investment officer at Fifth Third Asset Management in Cincinnati.
Traders and investors fear the protests could spread across the oil-rich region and lead to disruptions to Middle East commerce. Global political pressure could also heat up because of the security threat posed to Israel by deepening instability to a key regional ally.
US crude futures surged more than four per cent.
US Treasury debt, gold and Swiss francs, all traditional safe-haven investments, benefited from the sudden shift in market sentiment. Gold prices jumped two per cent.
"This could really encompass the region. Egypt is really the pivot point in the entire Arab world and has implications for things like the price of oil," said Dan Dorrow, head of research at FX advisory and execution firm Faros Trading in Stamford, Connecticut.
"If Monday looks a lot like today, then the political risk premium will swamp any kind of of central bank and economic fundamentals and we could see more safe-haven moves to the Swiss franc."
On Wall Street, shares fell from 29-month highs and the CBOE Volatility Index, or VIX, a broad measure of market anxiety, soared 23 per cent.
Disappointing results by high-profile companies, including Amazon.com and Ford Motor Co, added to the negative sentiment caused by the turmoil in Egypt.
Energy stocks declined despite the surge in oil prices as uncertainty over the weekend developments in Egypt and anemic growth in Chevron's oil reserves kept investors jittery.
The Dow Jones industrial average dropped 166.13 points, or 1.39 per cent, to 11,823.70. The Standard & Poor's 500 Index slid 23.19 points, or 1.78 per cent, to 1,276.35 and the NASDAQ Composite Index fell 68.30 points, or 2.48 per cent, to 2,686.98.
Nearly 10 billion shares traded on the NASDAQ, New York Stock Exchange and the American Stock Exchange for the heaviest trading day of the year, and topping last year's estimated daily average volume of 8.47 billion shares.
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