By Sinéad Carew and Yoruk Bahceli

(Reuters) -MSCI’s global equities index sank with Treasury yields as investors shunned riskier assets while oil futures rallied sharply on concerns about supply after Iran launched missiles at Israel on Tuesday.

Iran fired a salvo of ballistic missiles at Israel in retaliation for Israel’s campaign against Tehran’s Hezbollah allies in Lebanon. After the attacks, President Joe Biden directed the U.S. military to aid Israel’s defense and shoot down missiles aimed at Israel, the White House National Security Council said.

The U.S. dollar index rose and gold, traditionally a safe haven, rose more than 1% as investors looked for less risky places to put their money. Oil prices rallied as the escalating violence raised concerns about supply.

On top of geopolitical worries, U.S. investors worried about the aftermath of Hurricane Helene and the halt of about half of U.S. ocean shipping due to a strike by dock workers on the East and Gulf Coast after a midnight deadline passed with no sign of a new contract deal with port owners.

Adding extra pressure to equities, Wall Street had ended September on Monday with record closing highs for the S&P 500 and the Dow.

“Markets were priced for perfection. Then overnight we got a few extra wrinkles in the mix. The port strike is one. The hit east coast infrastructure took from the aftermath of hurricane Helene is another,” said Carol Schleif, Chief Investment Officer at BMO family office in Minneapolis.

“Then you throw in the third factor of Iran firing missiles at Israel,” said Schleif, noting that the attacks added to gains in the dollar and created demand for Treasuries. “Investors have been holding their breath hoping it wouldn’t escalate.”

Oil prices settled sharply higher though below session highs. Clay Seigle, an independent political risk strategist, said in an email said that an Israeli attack on Iranian oil production or export facilities could cause a material disruption, potentially more than a million barrels per day.

U.S. crude settle up 2.44% at $69.83 per barrel and Brent settled at $73.56 per barrel, up 2.59% on the day.

On Wall Street at 02:45 p.m. the Dow Jones Industrial Average fell 16.95 points, or 0.04%, to 42,313.05, the S&P 500 fell 36.03 points, or 0.63%, to 5,726.45 and the Nasdaq Composite fell 216.30 points, or 1.19%, to 17,973.27.

MSCI’s gauge of stocks across the globe fell 4.48 points, or 0.53%, to 847.30. Earlier, Europe’s STOXX 600 index ended the day down 0.38%.

In foreign exchange markets, the Japanese yen and Swiss franc, seen as safe haven currencies, had both gained ground earlier reports pre-empted the attacks from Iran. The dollar was also helped by a push back from Federal Reserve Chair Jerome Powell on Monday against bets on bigger interest rate cuts.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.49% to 101.24.

The euro was down 0.59% at $1.1068 while against the Japanese yen, the dollar strengthened 0.1% to 143.77. Against the Swiss franc, the dollar strengthened 0.24% to 0.848.

As investors looked to the safety of U.S. Treasuries, the yield on benchmark U.S. 10-year notes fell 5.5 basis points to 3.747%, from 3.802% late on Monday while the 30-year bond yield fell 5.1 basis points to 4.0823%.

The 2-year note yield, which typically moves in step with interest rate expectations, fell 2.8 basis points to 3.6228%, from 3.651% late on Monday.

Precious metals, also seen as a safe haven asset in uncertain times, were in demand on Tuesday. Spot gold rose 1.09% to $2,663.20 an ounce. U.S. gold futures rose 0.95% to $2,661.10 an ounce.

(Reporting by Sinéad Carew, Scott DiSavino, Yoruk Bahceli and Ankur Banerjee; Editing by David Evans and Nick Zieminski)

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