Oil futures rocketed more than 13 percent at one point, reaching the highest levels since January and reigniting worries about a renewed spike to inflation.

Wall Street opened in the red, with the Dow dropping more than one percent and S&P 500 shedding 0.8 percent, after equities in Asia and Europe tumbled.

While shares in many companies slid, those of energy groups jumped as crude prices were still up more than seven percent in European afternoon trading hours.

Shares in major airlines tumbled after flights around the Middle East were suspended.

The dollar jumped, while gold -- viewed as a safe haven investment -- was close to its record high of above $3,500 an ounce set in April.

The drop in equities and rise in safe-haven assets "all go to show just how fragile sentiment remains in the face of major geopolitical events", said David Morrison, senior market analyst at financial services provider Trade Nation.

"The question now is whether investors view this flare-up as a relatively contained incident within the longstanding animosity between Israel and Iran, or if this is the spark that ignites a conflagration across the Middle East and then beyond?"

Iran called Israel's wave of strikes a "declaration of war", after the Israeli military hit about 100 targets including nuclear facilities and killed senior figures, among them military chiefs and top nuclear scientists.

US President Donald Trump told Fox News he had prior knowledge of the Israeli strikes, which Israel said involved 200 fighter jets.

Trump also stressed that Tehran "cannot have a nuclear bomb".

He urged Tehran to "make a deal", warning that there will be more "death and destruction".

Iran's supreme leader Ayatollah Ali Khamenei warned Israel it faced a "bitter and painful" fate over the attacks, while the Iranian military said there were "no limits" to its response.

"The response of Iran is now going to be key," said Fawad Razaqzada, market analyst at City Index and Forex.com.

"Tensions are going to escalate and there is the potential for markets to gap at next week's open should Tehran strike back during the weekend," he said.

Matthew Ryan, head of market strategy at global financial-services firm Ebury, said: "The big fear for investors is that an escalation to the tensions will not only raise the risk of a prolonged conflict, but it could disrupt Iranian oil production."

"We suspect that safe haven assets will be well supported in the coming days, as markets brace for additional retaliatory attacks and the possibility of a wider conflict."

Rising oil prices have "broader implications", Ryan said, noting that they "could both weigh on the global growth outlook and keep inflationary pressures higher for longer".

This would complicate decision of major central banks, which will have to weigh between raising interest rates to curb inflation or cut them to stimulate the economy.

- Key figures at around 1335 GMT -

Brent North Sea Crude: UP 7.1 percent at $74.31 per barrel

West Texas Intermediate: UP 7.6 percent at $73.24 per barrel

New York - Dow: DOWN 1.2 percent at 42,457.21 points

New York - S&P 500: DOWN 0.7 percent at 6,003.24

New York - Nasdaq Composite: DOWN 0.8 percent at 19,503.92

London - FTSE 100: DOWN 0.3 percent at 8,862.01

Paris - CAC 40: DOWN 1.0 percent at 7,713.68

Frankfurt - DAX: DOWN 1.3 percent at 23,472.89

Tokyo - Nikkei 225: DOWN 0.9 percent at 37,834.25 (close)

Hong Kong - Hang Seng Index: DOWN 0.6 percent at 23,892.56 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,377.00 (close)

Euro/dollar: DOWN at $1.1507 from $1.1583 on Thursday

Pound/dollar: DOWN at $1.3526 from $1.3605

Dollar/yen: UP at 144.36 yen from 143.56 yen

Euro/pound: DOWN at 85.07 pence from 85.11 pence

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J.P. MORGAN CHASE & CO

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