Asian markets mostly fell and oil prices rallied Wednesday on fears that the Israel-Hamas conflict could spill over into a regional war after a strike on a Gaza hospital dealt a blow to President Joe Biden's diplomatic drive.
Markets had enjoyed a healthy run Tuesday on optimism that while Israeli Prime Minister Benjamin Netanyahu was preparing for a ground offensive in the territory, the crisis could be contained.
The Palestinian territory's health ministry blamed Israel for the hospital blast, but Tel Aviv said it was caused by a rocket misfired by Hamas ally Islamic Jihad.
Biden had planned to visit Israel and Jordan on Wednesday to talk to Netanyahu as well as Jordanian King Abdullah II, Palestinian leader Mahmud Abbas and Egyptian President Abdel Fattah al-Sisi in hopes of finding a way to de-escalate.
But news that at least 200 had been killed in the hospital blast saw the Arab leaders cancel their 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.
"The whole region is at the brink of falling into the abyss that this new cycle of death and destruction is pushing us towards," King Abdullah II said following talks with German Chancellor Olaf Scholz in Berlin on Tuesday.
"The threat of this war expanding is real."
Asian markets mostly fell, with Hong Kong, Shanghai, Singapore, Mumbai, Jakarta, Taipei and Manila all down.
Sydney, Seoul, Wellington and Bangkok edged up. Tokyo was flat.
London fell at the open, while Paris and Frankfurt were both down.
Crude jumped more than two percent at one point on worries about supplies from the oil-rich region in the event of a wider war, with some observers even warning the commodity could head towards $150 a barrel.
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.
"The recovery has been gathering strength on the back of a broader consumption recovery which has been aided by policy support," said HSBC's Erin Xin and Jing Liu.
"This has led to positive spill overs for the manufacturing sector. That said, the property sector continues to remain under pressure as recent property policy easing still needs time to help stabilise the sector."
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.
"Good news about the economy is once again bad news, since it will keep policymakers on the fence on delivering more tightening," said Edward Moya at OANDA.
"It seems the US economy isn't ready to head into a recession just yet."
And SPI Asset Management's Stephen Innes added: "Simply put, the US consumer appears unbowed and utterly unaffected by rising interest rates.
"Contrary to expectations that the US consumer is weakening, recent revisions suggest Americans may still have significant savings.
"The steady stream of strong macro data reinforces the view that economic growth in the US remains robust enough to avoid a recession -- a view that is admittedly increasingly part of a growing consensus."