Gains for Treasuries sent the 10-year yield as much as 14 basis points lower. An index of the dollar rose as much as 0.6%, while other havens including the Swiss franc, yen and gold also strengthened.

Oil prices jumped more than 3.5% with Brent crude rallying above $90 per barrel, and West Texas Intermediate spiking above $86 per barrel. A gauge of Asia ex-Japan credit default swaps is also headed for its biggest daily increase in more than eight months.

The moves came as Israel launched a missile strike on Iran less than a week after Tehran’s rocket and drone barrage, according to two US officials. An explosion was heard on Friday in Iran’s central city of Isfahan, the country’s semi-official Fars news agency reported.

Futures contracts for the S&P 500 and Nasdaq 100 fell more than 1% after the underlying benchmarks fell for a fifth session on Thursday, amid repricing of Federal Reserve interest rate cut expectations. Asian equities also dropped on Friday. Japan and South Korean shares declined more than 2%, while Australian and Hong Kong shares slid more than 1%

“The escalation in geopolitical risks was unexpected,” said Charu Chanana, a strategist at Saxo Capital Markets. “Semiconductor earnings have a huge task ahead to counter this increasing risk-off environment, with geopolitical escalations also mudding the outlook.”

Taiwan Semiconductor Manufacturing Co dropped after the company revised down the revenue growth outlook for the semiconductor industry, citing a softer recovery across smartphone and personal computer sectors. Infosys Ltd. slumped in the US after forecasting tepid sales growth for the year.

Japanese inflation data released Friday came in below economists’ estimates. An increasing number of economists expect the BOJ to raise rates again in October after it stands pat next week, with most of them flagging an earlier move in July as a risk scenario, according to a Bloomberg survey.

New York Fed president John Williams said while it isn’t his baseline expectation to hike interest rates, it’s possible — if warranted. His Atlanta counterpart Raphael Bostic said he doesn’t think it will be appropriate to ease until toward the end of 2024. The Fed may hold rates steady all year, Minneapolis Fed chief Neel Kashkari told Fox News Channel.

The market’s biggest worry right now is re-accelerating inflation, according to Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management.

“We are firmly in the camp of no rate cuts in 2024,” he said. “We believe investors should prepare for a higher-for-longer regime when it comes to both inflation and interest rates and that investment portfolios should be positioned for these dynamics for the foreseeable future.”

Most emerging market Asian currencies fell, with the Mexican peso briefly dropping more than 6% versus the dollar. Indonesia’s rupiah will be closely watched when trading resumes after the government asked state-owned firms to refrain from big dollar purchases in expectation the currency will weaken further.

Elsewhere, gold’s advance got boosts from demand from central banks and Chinese consumers. Bitcoin sank as part of a wider retreat in cryptocurrencies.