Portugal Colonial - Iran blasts rattle global markets

Iran's state media reported explosions in the central province of Isfahan on Friday, as US media quoted officials saying Israel had carried out retaliatory strikes against its arch-rival.

"Asian markets bore the brunt of the breaking news of a retaliatory attack on Iran by Israel, also sending Dow futures sharply lower and resulting in further spikes in gold and oil prices," noted Richard Hunter, head of markets at Interactive Investor.

There had been no reaction from Israeli or Iranian officials, and the extent of the damage remained unclear, but it appeared to have been a limited strike and analysts believe chances are good that both Israel and Iran will seek to de-escalate.

Crude oil prices dropped, having briefly surged as much as four percent on worries about supplies from the oil-rich region.

The rush for safety also saw the yen rally against the dollar and gold jump back past $2,400 per ounce, while the Swiss franc and US government bonds won support.

European equities recovered much of their losses and Wall Street opened mixed.

"Notwithstanding the limited response, we wouldn't say that there is an all-clear signal being sounded by the market, but there is a relief signal being sent that things weren't worse and that maybe, just maybe, the tit-for-tat strikes will come to an end and a wider regional conflict will be avoided," said Briefing.com analyst Patrick O'Hare.

Israel had warned it would hit back after Iran fired hundreds of missiles and drones at Israel almost a week ago in retaliation for a deadly strike -- which Tehran blamed on its foe -- that levelled Iran's consular annex at its embassy in Syria.

Fears of a major regional spillover from the war in Gaza between Israel and Iran-backed Palestinian militants have since soared. Appeals by world leaders for de-escalation again echoed on Friday.

The mood among traders was already downbeat as they contemplated the prospect of the Federal Reserve staying pat on US interest rates this year following data showing jobless claims came in below expectations while a gauge of business activity hit a two-year high.

Atlanta Fed boss Raphael Bostic said inflation is "too high" and he felt there was no need to cut borrowing costs until later in the year.

New York Fed chief John Williams and governor Michelle Bowman also said they saw fewer reductions than expected, if at all, this year.

In corporate action, shares in Netflix slumped 7.2 percent as trading got under way despite the streaming giant topping earnings and subscriber expectations in results published after the closing bell on Thursday.

- Key figures around 1330 GMT -

West Texas Intermediate: DOWN 0.3 percent at $82.50 per barrel

Brent North Sea Crude: DOWN 0.5 percent at $86.69 per barrel

New York - Dow: UP 0.1 percent at 37,820.19

New York - S&P 500: DOWN 0.1 percent at 5,005.67

New York - Nasdaq Composite: DOWN 0.4 percent at 15,540.57

London - FTSE 100: DOWN 0.5 percent at 7,834.21 points

Paris - CAC 40: DOWN less than 0.1 percent at 8,019.52

Frankfurt - DAX: DOWN 0.6 percent at 17,723.49

EURO STOXX 50: UP 0.4 percent at 4,919.38

Tokyo - Nikkei 225: DOWN 2.7 percent at 37,068.35 (close)

Hong Kong - Hang Seng Index: DOWN 1.0 percent at 16,224.14 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,065.26 (close)

Dollar/yen: DOWN at 154.56 yen from 154.67 yen on Thursday

Euro/dollar: UP at $1.0672 from $1.0645

Pound/dollar: UP at $1.2463 from $1.2438

Euro/pound: UP at 85.62 pence from 85.57 pence

burs-rl/cw

A.P.Maia--PC