SHANGHAI -- Asian shares and US treasury yields plunged on Wednesday, while gold and oil shot higher after Iran fired rockets at an Iraqi airbase that hosts US military forces, stoking fears of further sharp escalations in a developing conflict.
Iran's missile attacks on the Ain Al-Asad air base and another in Erbil, Iraq, early Wednesday came hours after the funeral of an Iranian commander whose killing in a US drone strike has raised fears of a wider war in the Middle East.
In morning trade, MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.5 percent. Japan's Nikkei dropped 2.5 percent and Australian shares fell 1 percent.
US crude soared 4.42 percent to $65.47 a barrel.
"We've moved on from how Iran will respond to now anticipating the US 52-pronged response as the US military forces in the region are in a heightened state of alert while likely preparing for war," said Stephen Innes, strategist at AxiTrader. "It's not going to be pretty today"
The sharp sell-off in risk assets was accompanied by steep drops in US Treasury yields as investors flocked to safety. Benchmark 10-year Treasury notes yielded 1.7188 percent, down more than 10 basis points from a US close of 1.825 percent on Tuesday.
The two-year yield dropped to 1.4581 percent compared with a US close of 1.546 percent.
The dollar also plunged against the yen, with the Japanese currency touching its strongest point against the greenback since October. The US currency was last down 0.69 percent against the yen at 107.67.
The euro gained 0.1 percent on the day to $1.1161.
The flight to safety and a falling dollar supported gold, which rocked 1.91 percent higher on the spot market to $1,603.93 per ounce.