Risk aversion was compounded by US Federal Reserve boss Jerome Powell, who indicated a pause in interest rates at the bank's next meeting but left open the prospect of a later hike.

That helped boost the dollar, which was close to topping 150 yen after surpassing the psychological level at the start of October for the first time in a year. The pound dropped on weak UK economic data.

Gold, a go-to haven asset in times of uncertainty, hit close to $2,000 an ounce.

"Risk-off sentiment continues to grip European markets," noted Victoria Scholar, head of investment at Interactive Investor, after losses for Asian stocks and on Thursday in the United States.

"The conflict between Israel and Gaza has pushed gold to a three-month high and sparked further gains in the oil market."

Israel has launched a relentless bombing campaign on Gaza while imposing a brazen siege that has deprived some two million Palestinians of water, food and electricity and, by extension, most contact with the outside world. At least 3,785 Palestinians, mostly civilians, have been killed in the bombardments, according to the latest toll from the Palestinian health ministry.

The Israeli military has escalated its aggression since 7 Oct. after an unprecedented Hamas attack on Israel killed at least 1,400 people, according to Israeli officials.

Traders are wrestling also with the prospect that US interest rates will remain elevated for some time as the Fed battles to contain inflation.

On Thursday, Powell suggested decision-makers would not hike at their next meeting at the end of October but left the door open to more tightening down the line.

News that weekly jobless claims in the United States came in lower than expected, suggesting the labour market was tighter than many predicted, dealt a blow to traders' confidence.

"Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal," Powell told a conference in New York.

Additional evidence of "persistently above-trend growth" or fresh signs of tightness in the labour market "could warrant further tightening of monetary policy".

Investors have also tracked the yield on the 10-year US Treasury note, seen as a proxy for US interest rates, which rose above five percent for the first time since 2007 on Thursday before falling back to 4.9 percent.

*This story was edited by Ahram Online