Global stock markets took another hit Monday while oil and gold prices surged in response to the escalating tensions in the Middle East following the U.S. killing of Iran’s top general.

The death of Qassem Soleimani in a U.S. drone strike has heightened geopolitical risks for financial markets, including concerns about potential disruptions to the global oil supply.

The U.S. has reinforced its presence in the Middle East in preparation for reprisals from Iran, which has vowed revenge. Iraq, meanwhile, has called for the expulsion of American troops from its territory.

The moves in financial markets illustrated the concerns of investors. In time of volatility, traders often seek the sanctuary of assets like gold and steer clear of those that are considered risky, such as stocks.

“The escalation in the Middle East was both unexpected and unwelcome,” said Craig Erlam, senior market analyst at trading platform OANDA Europe. “Investors are now fully in defensive mode, hoping for the best but fearing the worst. Safe havens are naturally performing solidly while stocks and other risky assets take a pummeling.”

In oil markets, a barrel of benchmark New York crude was up 0.9 per cent at $63.60, while the international Brent standard rose 1.1 per cent to $69.37 a barrel. Gold, which is widely considered the safest financial asset, hit seven-year highs, up 1.7 per cent to $1,579.60 an ounce.

In stock markets, European indexes followed Asia lower and Wall Street appeared set for sizeable falls at the open, on a day when most traders are back at their desks following the Christmas break.

In Europe, Germany’s DAX slid 1.4 per cent to 13,037 while the CAC 40 in Paris declined 0.9 per cent to 5,989. In the U.S., Dow futures and the broader S&P 500 futures were 0.5 per cent lower.

Earlier, Asian economies, which depend heavily on oil from the Middle East, saw their stock markets fall. The Nikkei 225 index in Japan slid 1.9 per cent to 2204.86, while Hong Kong’s Hang Seng index lost 0.8 per cent to 28,226.19. In South Korea, the Kospi lost one per cent to 2,155.07. The Shanghai Composite index fared better, ending flat, at 3,083.41.

Many indexes around the world are coming off record highs after closing out 2019 with their best annual performance for years. Whether those gains get wiped out in the early days of 2020 will depend on what happens next in the Middle East.

“Whether it escalates into large-scale attacks over the coming days and weeks, and grows into a full-blown U.S.-Iran conflict, is very hard to say,” said Neil Wilson, chief markets analyst at in London. “But the risk premium genie is out of the bottle again.”