Tensions erased new year’s gains for world stocks on Monday as investors pushed safe-haven gold to a seven-year high and oil jumped to its highest since September.

Spot gold gained 1.8% to $1,579.72 per ounce to reach its highest since April 2013. Oil prices extended gains. Brent crude futures jumped past the $70 a barrel mark, while US crude climbed 1.7% to $64.12.

European shares extended losses and were set for their worst day in a week, with the pan-European STOXX 600 index down 1% by midday in London. The European oil and gas stock index rose about 0.86%, the only gains, to reach its highest since July.

“Geopolitical events by their nature are unpredictable, but previous periods of increased tensions suggest that the impact on wider markets tends to be short-lived, with more lasting effects confined to local markets,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

In Asia, Japan’s Nikkei slid almost 2%. E-Mini futures for the S&P 500 fell 0.6%, indicating a lower open on Wall Street later.

Chinese shares, which had opened in the red, reversed their losses, as did Australian shares, which ended the day flat. Hong Kong’s Hang Seng index lost 0.8%.

Sovereign bonds benefited from the safety bid, with yields on 10-year Treasuries down at 1.7725% after falling 10 basis points on Friday.

The yen remained the favoured safe haven among currencies thanks to Japan’s massive holdings of foreign assets. Investors assume Japanese funds would repatriate their money during a true global crisis, pushing the yen higher.

“You can’t accuse the markets of over-reacting,” said Societe Generale strategist Kit Juckes. “FX moves are small, slightly lower bond yields, slightly softer equities, but nothing is going mental.” On Monday, the dollar was last at 108.05 yen, after falling to a three-month trough of 107.77 earlier in the session.

The dollar was steadier against other majors, with the euro up at $1.1202. Against a basket of currencies, the dollar was holding at 96.562. Oil prices rose over 1% on Monday, pushing Brent above $70 a barrel, as rhetoric from the United States, Iran and Iraq fanned tensions in the Middle East after a US air strike which killed a top Iranian military commander.

Brent crude futures soared to a high of $70.74 a barrel and was at $69.55 at 1150 GMT, up 95 cents, or 1.38%, from Friday’s settlement.

US West Texas Intermediate crude was at $63.77 a barrel, up 72 cents, or 1.14%, after touching $64.72, the highest since April.

“Geopolitics tend to be a temporary force on oil markets and we believe this time is no different. We raise our near-term forecast to $65 per barrel, and maintain a neutral view”.

The Economist Intelligence Unit raised its first quarter projection for Brent by $5 to $70 a barrel, assessing that Iran would likely seek to avoid an open conflict.

“We maintain our forecast that the two countries are likely to avoid outright war. Iran is not in a position financially, after more than a year of crippling US sanctions, to finance a lopsided war with the US,” EIU global economist Cailin Birch wrote in a note.

In the United States, crude stocks fell by their most since June as exports exceeded 4 million barrels per day for the first time in history, the Energy Information Administration said on Friday.

Elsewhere, bad weather shut all four oil export terminals in eastern Libya on Sunday and the closure could last three days, port sources said.

Britain’s benchmark stock indexes began the first full trading week of the new decade on the back foot as they fell 1% after rising tensions. The FTSE 100 was tracking its worst day in more than a month, though oil majors Shell and BP benefited from a surge in crude prices to jump 1% each and insulated the bourse from steeper losses.

BP and Shell had helped the FTSE 100 bag gains on Friday, while its peers fell after the air strike. However, the latest escalation seemed to be too much for the two heavyweight components to counter.

“With so much cash heavily invested in global recovery trade in the elusive search for yield, a downward correction in asset prices could be aggressive,” Halley warned.

An index of airlines dropped nearly 2% and was headed for its worst two-day fall since early December, as higher oil prices raised worries of a hit to their margins.

Morrisons and Sainsbury’s fell 3.5% and 1.7%, respectively. Traders also cited the drop in Morrisons’ shares to a rating downgrade by BofA Global Research.

Hikma slid 5.4% and was the biggest blue-chip loser after a rating downgrade by JP Morgan. Its shares were on course for their worst day in nearly a year.

NMC Health, whose stock tanked 30% last month after criticism from short-seller Muddy Waters, skidded another 5%. The healthcare provider said an independent review into the firm would initially assess its cash balances.

Agenices