In foreign exchange markets, the British pound spiked amid signs that London and Brussels might still win the race against time and avoid a no-deal Brexit as a deadline looms.

World stock markets meanwhile powered ahead, boosted by hopes that Washington and Beijing are getting closer to a deal on trade.

"Global stocks continued to rally on the back of optimism the US and China will reach an agreement of some sort to prevent any further escalation in their bitter trade war," said Fawad Razaqzada at Forex.com.

In commodities, Brent and New York crude contracts were catapulted higher as news of the suspected missile attack flashed across traders' screens just after 0600 GMT, ratcheting up geopolitical and supply tensions in the crude-rich tinderbox Gulf region.

- 'Fuel on fire' -

"This clearly puts fuel on the Middle East fire," SEB commodities analyst Bjarne Schieldrop told AFP.

"After the attack on Saudi a few weeks ago, it's not a matter of if we get new comparable events -- but when, and how much."

On September 14 attacks on Aramco plants in Abqaiq and Khurais initially halved the kingdom's crude output and set oil markets alight.

Friday's blasts could escalate quickly and spell more global economic turmoil, according to Nordea Markets analyst Thina Margrethe Saltvedt.

"The risk premium is rising following the attack on the Iranian oil tanker, not because the tanker per se contains enough oil to squeeze the market, but the risk that this incident will be retaliated or more attacks would come either in Iran, Saudi Arabia or Iraq," Saltvedt told AFP.

Saltvedt added: "The prices might move up sharply -- the sky is the limit in these worst case scenarios.

- Pound on a roll -

The pound had a rollercoaster day, at first falling after EU Council President Donald Tusk said Britain had not come up with a workable Brexit deal, seemingly pouring cold water on the previous day's optimism sparked by a joint British-Irish statement.

But then the currency took off against both the dollar and the euro when EU member states on Friday gave Brexit negotiator Michel Barnier the go-ahead for more intense talks with Britain over the weekend, just days before a key European summit.

David Cheetham at XTB said the latest developments may "well be a pivotal turning point in negotiations" but "greater clarity" was still needed.

- 'Huge meeting' -

Stock markets across the global saw strong gains as hopes that a damaging trade war between the US and China may be nearing its end gained traction.

"Trump welcomes Chinese Vice Premier Liu He to the White House after productive talks with his trade team on Thursday in what could be the first step towards de-escalating the trade war that has plagued the global economy for the last year," said Craig Erlam at OANDA, calling the encounter a "huge meeting"

On Wall Street the Dow Jones index jumped more than one percent at the opening, matching gains across European markets.

Frankfurt was the standout, up more than two percent by the mid-afternoon, while London did less well, held back by the strong pound.

- Key figures around 1340 GMT -

London - FTSE 100: UP 0.5 percent at 7,222.17 points

Paris - CAC 40: UP 1.2 percent at 5,637.53

Frankfurt - DAX 30: UP 2.2 percent at 12,427.84

EURO STOXX 50: UP 1.5 percent at 3,546.95

New York - Dow: UP 1.2 percent at 26,810.08

Tokyo - Nikkei 225: UP 1.2 percent at 21,798.87 (close)

Hong Kong - Hang Seng: UP 2.3 percent at 26,308.44 (close)

Shanghai - Composite: UP 0.9 percent at 2,973.66 (close)

Euro/dollar: UP at $1.1055 from $1.1005 at 2100 GMT

Dollar/yen: UP at 108.42 yen from 107.98 yen

Pound/dollar: UP at $1.2657 from $1.2443

Euro/pound: DOWN at 87.36 pence from 88.45 pence

Brent North Sea crude: UP 0.9 percent at $59.60 per barrel

West Texas Intermediate: UP 0.6 percent at $53.86

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SEB SA

NORDEA BANK