Crude futures briefly vaulted three percent higher as fears grew over broadening unrest that could destabilize the crude-rich Middle East with some analysts predicting a possible return to $100 oil, while gold hit a four-week peak as investors sought the safe haven investment.

"Last night's explosion at a Gaza hospital, which killed hundreds, has raised the stakes of the conflict and, according to some analysts, reduced the chances of a negotiated solution," said ActivTrades analyst Ricardo Evangelista.

He estimated there is now a higher probability that other countries in the region, such as Iran, could end up involved in the war.

"This scenario would almost certainly affect the global oil supply and could drive the price of the barrel to levels above the $100 mark," he added.

World stock markets had enjoyed a healthy run Tuesday on optimism that the crisis could be contained even as Israeli Prime Minister Benjamin Netanyahu prepared for a ground offensive in the blockaded Gaza Strip.

Biden had planned to visit Israel on Wednesday to meet with Netanyahu and then travel on to Jordan for a meeting with Jordanian King Abdullah II, Palestinian leader Mahmud Abbas and Egyptian President Abdel Fattah al-Sisi on finding possible ways to de-escalate the conflict.

But after more than 500 people had been killed at the hospital massacre, the Arab leaders canceled the summit in Amman and fanned concerns of a regional conflagration, with Iran warning this week that a wider war was becoming "inevitable".

There was an increase in fighting between Israeli troops and Tehran-backed Hezbollah on the Lebanon border.

European markets fell across the board with London also dented by news of stubbornly high UK inflation.

Asian markets mostly dropped, with Hong Kong, Shanghai, Singapore, Mumbai, Jakarta, Taipei and Manila all down.

Sydney, Seoul, Wellington, and Bangkok edged up. Tokyo was flat.

- China growth -

Forecast-busting economic growth data out of China provided a shaft of light for traders.

The 4.9 percent third-quarter expansion was slower than the previous three months but much better than analyst estimates, lifting hopes that the world's number-two economy was seeing some stabilisation after a torrid year.

The figures were helped by a healthy jump in retail sales, suggesting the country's consumers are regaining a little confidence, though officials continue to face calls for more stimulus to kickstart the economy.

A report showing a better-than-expected rise in US retail sales revived talk of another interest rate hike by the Federal Reserve, even after a string of decision-makers lined up in recent weeks to suggest monetary policy was likely tight enough to bring inflation down.