Anxiety over Middle East hits global stocks

Global markets mostly sank Tuesday after Israel's army chief vowed a response to Iran's attack on his country.

Oil prices dipped despite jitters that Israel could target energy infrastructure in key crude producer Iran.

Hong Kong and Tokyo stocks lost about two percent while Shanghai shed more than one percent amid mixed Chinese data.

Frankfurt, London and Paris all shed more than one percent in afternoon trading.

Wall Street's main indices opened mixed after Bank of America beat earnings expectations.

Briefing.com analyst Patrick O'Hare said buyers were unsettled.

"That fits with an environment of heightened uncertainty and headline risk, like the one we are in now, with a hot geopolitical situation, a tepid response to earnings results, and the cold line the S&P 500 and Nasdaq Composite have crossed below their 50-day moving averages," he said.

  'Heightened tensions' 

 "Sentiment is shaky at best right now with heightened geopolitical tensions in the Middle East, coming alongside increased concerns that the Federal Reserve may opt to maintain interest rates at the current levels for some time yet," noted analyst Joshua Mahony at Scope Markets.

Tehran fired hundreds of missiles and drones at Israel on Saturday, saying the attack was retaliation for an April 1 strike on the consular annex of its Damascus embassy that killed seven Revolutionary Guards including two generals. It blamed Israel for the attack.

While air defence systems destroyed the vast majority of the barrage and Iran said "the matter can be deemed concluded", Israel's army chief General Herzi Halevi warned that there will be a response, fuelling worries of an escalation.

"The key for markets will now be the extent of the retaliation," said Matthew Ryan, head of market strategy at financial services firm Ebury.

"Should Israel follow up with similarly ambitious missile attacks or, under a worst-case scenario, other nations become embroiled in the conflict, notably the US, then we would likely see a flight to safety in markets.

"The threat to global oil supply would also likely trigger a sharp move upwards in oil prices, which could comfortably jump above $100 a barrel should investors fear a wider regional war."

Oil however pulled further lower Tuesday after sliding the previous day on hopes for a de-escalation.

 China's mixed data 

 In Asia, traders digested figures showing Chinese expansion beat expectations in the first three months of the year but retail and industrial data came in well below par, suggesting leaders have much work to do to kickstart growth.

Investors appeared to ignore figures showing China's economy grew 5.3 percent in the first three months of the year, above the 4.6 percent predicted in an AFP survey of analysts.

Other data reinforced worries about the outlook, with industrial production and retail sales coming in well below forecasts, ramping up worries about the prospects for the next quarter.

 Key figures around 1330 GMT 

 New York - Dow: UP 0.6 percent at 37,976.35 points

New York - S&P 500: UP less than 0.1 percent at 5,065.58

New York - Nasdaq Composite: DOWN 0.1 percent at 15,868.67

London - FTSE 100: DOWN 1.7 percent at 7,832.99

Paris - CAC 40: DOWN 1.3 percent at 7,941.05

Frankfurt - DAX: DOWN 1.2 percent at 17,805.51

EURO STOXX 50: DOWN 1.3 percent at 4,921.54

Tokyo - Nikkei 225: DOWN 1.9 percent at 38,471.20 (close)

Hong Kong - Hang Seng Index: DOWN 2.1 percent at 16,248.97 (close)

Shanghai - Composite: DOWN 1.7 percent at 3,007.07 (close)

Dollar/yen: UP at 154.73 yen from 154.24 yen on Monday

Euro/dollar: UP at $1.0635 from $1.0626

Pound/dollar: UP at $1.2457 from $1.2449

Euro/pound: UP at 85.34 pence from 85.31 pence

Brent North Sea Crude: DOWN 0.2 percent at $89.89 per barrel

West Texas Intermediate: DOWN 0.2 percent at $85.24 per barrel