Stocks extended their losses for the week on Friday as investors piled into government bonds and gold for cover while scrutinising the latest twists in Russia’s escalating invasion of Ukraine, which included seizing a huge nuclear plant.

Industrial metals, grains and oil gained while Asian shares mined 16-month lows after news of a fire, later extinguished, near a Ukraine nuclear facility following fighting with Russian forces.

In Europe, the STOXX index of 600 companies was sank 1.4 per cent to 431 points, hitting a new low for the year as the benchmark eyed correction territory, meaning down 10 per cent from its highs.

The MSCI All Country stocks index shed 0.6 per cent to 686 points, down about 10 per cent for the year.

With a 25 basis point interest rate increase by the Federal Reserve later this month now all but certain, economic data like US non-farm payrolls on Friday before the opening bell on Wall Street were taking a back seat, said Michael Hewson, chief markets analyst at CMC Markets.

“The market is driven so much by news headlines risk that the fundamentals barely matter at the moment,” Hewson said.

Even though US rates were set to rise, investors were still piling into government bonds for safety, he said.

“You have escalating inflation risk, you have huge uncertainty about what’s going to happen next on the headline front, and a Russian president who wouldn’t rule out nuclear weapons - that is a pretty toxic backdrop,” Hewson said.

Crude oil rebounded, and aluminium touched a record high of $3,850 a tonne in London as the intensifying conflict in Ukraine stocked fears of a supply squeeze in the metal from Russia, a major producer. Nickel touched an 11-year high for similar reasons.

“People came into this situation thinking commodities had had enough of a run already but the war has added a new lease of life,” said Mike Kelly, head of global multi-asset at PineBridge Investments.

“Skyrocketing inflation is what people fear and the best hedge for that is energy and industrial metals,” said Mike Kelly, head of global multi-asset at PineBridge Investments.

In currency markets, the euro lost further ground and was set for its worst week versus the dollar in nearly two years as the prospect of sustained high commodity prices continued to drag on expectations of European economic growth. S&P 500 futures and Nasdaq futures were down around 0.5 per cent.

Indian shares: Indian shares slumped on Friday to their lowest in seven months, tracking a sell-off in global equities, as a worsening Ukraine crisis sent oil prices surging and stoked inflation fears.

The blue-chip NSE Nifty 50 index was down 1.77 per cent at 16,205.45 by 0509 GMT, with all of its major sub-indexes seeing declines. The S&P BSE Sensex was down 1.8 per cent at 54,113.57.

Both the indexes fell over 2 per cent earlier in the session, touching their lowest since early-August last year, and were set for their fourth consecutive weekly loss.

Ukraine’s state emergency service said on Friday a fire that broke out in a building near the largest nuclear power plant in Europe during intense fighting between Russian and Ukrainian forces has been extinguished.

“The inflation in January just touched the upper tolerance level of 6 per cent of the Indian central bank’s targeted range and the Reserve Bank of India is likely to look at the persistence of high inflation before taking a decision on policy rates,” said Mohit Ralhan, a managing partner at TIW Capital Group.

Higher oil prices may push the inflation above the upper tolerance level but its persistence will depend on how much longer the Russia-Ukraine conflict continues, Ralhan added.

India is the world’s third-largest importer of crude oil, and rising prices push up its trade and current account deficit while hurting the rupee and fuelling imported inflation.

The Nifty’s auto index, bank index, financial services index, and IT index were among the top losers, falling between 1 per cent and 3 per cent.

Among a few gainers on the Nifty 50, steel producer Tata Steel Ltd and cigarettes-hotel conglomerate ITC Ltd rose 1 per cent each.

In broader Asian markets, shares suffered heavy losses while oil prices jumped on the worsening Russia-Ukraine conflict.

The fire that broke out in a training building near the Zaporizhzhia nuclear power plant, the largest of its kind in Europe, during fighting between Russian and Ukrainian forces was later extinguished, authorities said on Friday.

While that helped ease some of the initial panic that hit markets in Asia, investors remain extremely anxious about the conflict.

“Markets are worried about nuclear fallout. The risk is that there is a miscalculation or over-reaction and the war prolongs,” said Vasu Menon, executive director of investment strategy at OCBC Bank.”