Markets have had a turbulent session after North Korea’s missile test over Japan prompted a warning from Donald Trump that “all options are on the table”.
In London, the FTSE 100 slipped by 1% and bourses in Paris and Frankfurt were also down.
On Wall Street, the Dow Jones Industrial Average and the S&P 500 opened sharply lower though they later fought back to turn higher after better than expected US consumer confidence figures.
Volatile trading saw investors pile into safe havens such as gold on worries over North Korea as well as the impact of storm Harvey in Texas, sending the US dollar lower – though it also turned positive later.
The US currency had already been under pressure in recent days over the diminishing prospect of another interest rate hike this year, especially after a threat by Mr Trump to shut down Congress amid a stand-off over his plan for a Mexico border wall.
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The dollar’s weakness helped the euro jump to above $1.20 against it.
But it did little for the pound, which remained stuck at just over $1.29 and also hit a new eight-year low against the single currency – it is now worth less than €1.08.
In London stocks, banks were among the losers, with Lloyds Banking Group, Barclays and Royal Bank of Scotland each down around 2%.
Precious metal miners Randgold Resources and Fresnillo topped the index, up 5% and 3%, as the price of gold climbed.
Craig Erlam, senior market analyst at Oanda, said: “We’re seeing significant risk aversion in the markets on Tuesday
“A ramp up in tensions between North Korea and the US, South Korea and Japan overnight has raised geopolitical risk once again.
“The distressing impact of Hurricane Harvey in Houston is also weighing heavily on sentiment this morning.
“From a markets perspective, the uncertainty surrounding the cost and the economic implications of the storm is going to be a concern for investors, although it is difficult to look past the sheer devastation it has caused at the moment.”