Oil, gold rally as Middle East tension keeps markets on edge

Oil prices rose on Wednesday, extending the previous day's rally, and safe haven gold pushed towards a record high after Iran's missile attack on Israel ramped up fears about an escalation in the Middle East.

News of the launch rattled U.S. and European traders and sparked a sell-off on most markets, though Asia fared slightly better, with Hong Kong resuming its China stimulus-fuelled rally as it reopened after a one-day break.

Both main crude contracts jumped more than 5 percent at one point Tuesday after Iran fired dozens of missiles at Israel in response to the killings of Tehran-backed militant leaders.

"The burning question is whether Iran's missile strike is a one-off response or the start of something much bigger. Most bets lean towards the former, especially with the U.S. stepping in to back Israel," said independent analyst Stephen Innes.

"Iran's oil infrastructure could very well be in their crosshairs. And let's be real-taking a swing at Iran's oil lifeline could have far-reaching economic consequences, sparking a severe escalation," Innes wrote in his The Dark Side Of The Boom newsletter.

Demand for gold, considered a go-to in times of uncertainty and turmoil, pushed the precious metal close to its $2,685 record.

The mood also soured as U.S. dockworkers went on strike at East and Gulf coast ports, which could cost the world's largest economy billions of dollars a day and stoke inflation.

"Participants cast a wary eye toward escalating Middle East tensions and a U.S. port strike while awaiting the first batch of this week's pivotal US jobs and manufacturing data," said Joe Mazzola, a strategist at Charles Schwab.

Official data showed on Oct. 1 that eurozone inflation fell below the European Central...