Investors run for cover amid fear of US conflict with Russia

US President Donald Trump's promise that US missiles "will be coming" to Syria caused the benchmark crude price to climb sharply. Picture / AP

Global markets scrambled for safety as the West stands on the brink of conflict with Russia in the Middle East sending oil prices to their highest level in three years.

US President Donald Trump's promise that US missiles "will be coming" to Syria caused the benchmark crude price to climb sharply above three year highs to almost US$73 ($99.1) a barrel amid a volley of threats between the US and Russia and a separate air strike targeting oil titan Saudi Arabia.

The global oil price rocketed by almost US$2 in the space of an hour after the oil rich kingdom confirmed that it intercepted two Yemen rebel missiles above the capital Riyadh which suggest that the country's major oil facilities could be a target.

The Houthi attacks on the world's largest oil producer spurred global oil markets up almost 9 per cent this week alone to the highest prices seen since December 2014.

The threat of a US-led strike against Syria and its Russian allies also kindled the largest gold market gains in the past year. The gold price surged to 20 month highs of US$1,365 an ounce as rattled investors fled for cover in familiar safe haven territory including government bonds and the Japanese yen.

The sharp escalation of geopolitical tensions quickly eclipsed market jitters earlier this week over a looming trade war between the US and China.

"Trade wars now seem quite petty compared to the prospect of conflict," IG's Chris Beauchamp said.

The threat of a US-led strike by President Donald Trump against Syria and its Russian allies also kindled the largest gold market gains in the past year. Picture / AP

Trump warned Russia to "get ready" for missiles targeting Syrian President Bashar Assad's regime in a blow to US stocks already reeling from the tense diplomatic rhetoric between US and Chinese policymakers over escalating trade tariffs.

On Wall Street, the blue-chip Dow Jones index slipped 0.9 per cent to 24,189.45, while the US dollar lost traction against a basket of other currencies, adding fuel to oil buyers eager to pile into the dollar denominated market.

"Military intervention in Syria that puts the US in direct confrontation with Russia can only be a bad thing for market sentiment," Jasper Lawler, at LCG, warned.

Russian President Vladimir Putin addresses the troops at the Hemeimeem air base in Syria. Picture / AP

This proved even more true of Russia's currency markets as the rouble continued to lose ground against the dollar under the weight of US financial sanctions to hit its lowest rate since late 2016. The rouble lost 10 per cent relative to the dollar.

The gap between the rouble and the price of oil is the largest since 2009, according to Bloomberg data.

Market analysts at Rabobank added that the fragile market sentiment hangs on whether the US and allied forces plan a one-off preventive attack or "something far larger and aimed at toppling Syria's Bashar Assad entirely".

In Europe the reaction on equity markets was more muted. The FTSE 100 nudged down 0.1 per cent off a six-week high while the DAX in Frankfurt slipped 0.8 per cent. In New Zealand the key benchmark S&P/NZX 50 Index dropped 0.2 per cent yesterday and was down 0.6 per cent during trading this afternoon.