LONDON: World stocks fell while safe-haven gold and German government bonds were in demand on Tuesday as tension in the Middle East, an election in Britain and upcoming testimony from the former head of the FBI pushed investors away from risky assets.
Meanwhile, oil prices fell further below $50 a barrel on Tuesday on concerns that a diplomatic rift between Qatar and several Arab states including Saudi Arabia could undermine efforts by OPEC to tighten the market.
Benchmark Brent crude oil was 15 cents a barrel lower at $49.32 by 0755 GMT, down around 8 percent from the open of futures trading on May 25, when an Opec-led policy to cut oil output was extended into the first quarter of 2018.
US light crude CLc1 was down 15 cents at $47.25. Leading Arab powers including Saudi Arabia, Egypt and the United Arab Emirates cut ties with Qatar on Monday, accusing it of support for Islamist militants and Iran.
Steps taken include preventing ships coming from or going to the small peninsular nation from docking at Fujairah, in the UAE, used by Qatari oil and liquefied natural gas (LNG) tankers to take on new shipping fuel.
European stocks fell early on Tuesday after leading Arab powers cut ties with Qatar the previous day, accusing it of supporting militants and Iran.
Shares fell in US and Asian trading on the back of concerns over politics either side of the Atlantic.
On what BayernLB analysts called "Super Thursday", British voters will go to polls in an increasingly unpredictable general election, the European Central Bank is due to meet and later the same day former FBI director James Comey will testify before Congress.
Big week ahead
"We have a big week or so ahead of us with the UK heading to the polls and the ECB announcing its latest monetary policy decision on Thursday and the Federal Reserve doing the same next Wednesday," said Craig Erlam, a market analyst for OANDA securities.
"Once these events pass, we may have a little more clarity and therefore see a little less caution in the markets."
The diplomatic spat in the Middle East left oil prices hovering just below $50 a barrel LCOc1 and that in turn hit European stocks, which fell across the board; the broad Euro STOXX 600 was down 0.4 percent.
World stocks edged further away from record highs hit last week, the MSCI world equity index, which tracks shares in 46 countries, fell 0.12 percent.
Investors instead bought gold and German government bonds - two of the safest assets in the world - pushing gold prices to six-week highs and German 10-year borrowing costs to six-week lows.
Erlam said the one area for concern is how steady sterling has been — the currency was up against the dollar and euro on Tuesday — potentially a sign of complacency before the election.
The lead of British Prime Minister Theresa May over the opposition Labour Party ahead of Thursday's general election has narrowed to just 1 percentage point, according to a poll conducted before the attacks in London on Saturday.
Other polls in recent days have found bigger leads for the Conservatives of up to 11 and 12 points.
Sterling edged higher against both the dollar and the euro.
The dollar, meanwhile, touched a seven-month low ahead of Comey's testimony. Reports suggest the former FBI chief plans to talk about conversations in which US President Trump pressured him to drop his investigation into former national security adviser Mike Flynn, who was fired for failing to disclose conversations with Russian officials.
The dollar index, which tracks the currency against a basket of trade-weighted peers, fell to its lowest level since the November US election.
Data on Monday of US services sector activity slowing in May as new orders tumbled also hit the greenback.
