By Will Horner
Global stocks fell Friday and investors rushed into bonds, gold and other haven assets as rising tensions in the Middle East added to concerns over growth and trade.
Weak Chinese economic data weighed on markets, pushing investors toward bonds. Yields on Germany's 10-year government bond, which falls as the price rises, fell to their lowest level on record at minus 0.262%. The yield on 10-year U.S. Treasurys slipped to 2.067% from 2.096% Thursday.
U.S. futures put the Dow Jones Industrial Average and S&P 500 on course to fall 0.2% and 0.3%, respectively. Nasdaq 100 futures were 0.8% lower.
In Europe, the Stoxx 600 was down 0.7%. That followed a downbeat session in Asia, with indexes in China, Korea and Hong Kong lower. However, Japan's Nikkei climbed 0.4%.
Late Thursday, the U.S. said Iran was behind an attack on two oil tankers in the Gulf of Oman that sent oil prices soaring. That added to an already tense situation in the crucial shipping channel after an attack on four other tankers in May. Iran denied involvement in the attacks.
Gold prices hit a 14-month high before paring back slightly, with spot gold up 0.9% at $1,353.84 a troy ounce.
Thursday's attack boosted fears of a broader military conflict in the Persian Gulf which could disrupt oil shipments.
Oil prices stabilized Friday, with Brent crude flat at $62.02 a barrel, after the International Energy Agency said oil demand would likely cool as global economic growth slows.
Falling U.S. Treasury yields were a clear sign that investors were concerned about the risks presented by a standoff in the Persian Gulf, said Geoffrey Yu, head of the U.K. investment office at UBS Wealth Management.
"You've got the potential to drive inflation higher at least in the short term, yet Treasury bonds yields are lower. When that diverges it is a clear sign of demand for safe haven assets," he said. "This is the safety flow overwhelming any other sources of market risk such as higher inflation."
The Japanese yen, also seen as a haven, was up 0.3% against the euro and 0.2% against the U.S. dollar. However, the Japanese economy's exposure to Persian Gulf oil was likely making some investors think twice before buying the currency, Mr. Yu said.
The rise in oil prices helped support global stocks Thursday. The S&P 500 and Dow Jones Industrial Average both closed 0.4% higher, as rising energy company shares helped the U.S. indexes snap a two-day losing streak.
Markets are "still reverberating to the tune of trade tensions between the U.S. and China and now geopolitical tensions following the attacks" in the Gulf of Oman, said Kit Juckes, global macro strategist at Société Générale.
Oil prices "have settled down a bit but it hasn't taken tension out of financial markets," he added.
European stocks most exposed to oil prices and global trade registered the biggest drops Friday. The Stoxx Europe 600's technology subindex was down 1.8%, while its autos and parts subindex was 1.3% lower.
In Asia, the Shanghai Composite was down 1%, while the Shenzhen index was 1.8% lower. Hong Kong's Hang Seng was down 0.7% amid protests in the city against an unpopular extradition bill. Data later in the day showed China's industrial output slowed, adding to fears the country's economic growth was faltering.
U.S. government bond yields were also falling as investors priced in expectations of an interest-rate cut by the Federal Reserve, after weak U.S. inflation figures Wednesday added to signals from the central bank that it might cut rates, Mr. Juckes said.
U.S. retail sales data due later Friday will be closely watched by investors as they look for clues on the nation's largely consumer-driven economic growth, analysts said. The release is the last major U.S. economic report before a meeting of the Fed's policy-making committee next week.