Stocks off two-month low as fear of Middle East escalation eases

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LONDON, April 19 - Global shares hit a two-month low on Friday after Israel's attack on Iran triggered a rush into safe haven bonds and gold, lifting Wall Street's 'fear index' to its highest level since October.

Oil prices had jumped $3 a barrel on concern that Middle East oil supply could be disrupted, but later began moving lower as fears of a major escalation in Middle East hostilities eased.The MSCI All Country stock index , opens new tab was down 0.38%, hitting its weakest level since February but off the day's lows.

"This is not just a Middle East thing that causes the risk off now. More fundamentally, it's the fading rate-cut expectations by the Fed, and on the back of it is higher inflation expectations, and this conflict...makes the thing worse basically," Matsuzawa said. "The first of that is an oil shock - we have seen this tape play out before, with Brent over $100 a barrel and so on," Yarrow said.

Hopes for a Fed rate cut as early as June have now been pushed back to later in the year, taking some wind out of the stock market.

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