News of the launches rattled US and European traders and sparked a sell-off on most markets, though Asia fared slightly better, with Hong Kong jumping more than six percent as it reopened after a one-day break.
Both main crude contracts shot up more than five percent at one point Tuesday after Iran fired dozens of missiles at Israel in response to the killings of Tehran-backed militant leaders.
Washington said it was discussing a joint response and warning of "severe consequences" and Israel vowed it would make Iran "pay" for the launch. Tehran threatened to hit all Israeli infrastructure if attacked.
"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 US stepping in to back Israel," said independent analyst Stephen Innes.
"Iran's oil infrastructure could very well be in their crosshairs. 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 -- a go-to in times of uncertainty and turmoil -- pushed the precious metal close to its $2,685 record.
All three main indexes on Wall Street ended in the red, with the Nasdaq down more than one percent.
But Asia fared a little better.
Hong Kong soared more than six percent -- and easily topped 22,000 points for the first time since February last year -- as traders returned from a one-day break to resume buying beaten-down stocks after China last week began unveiling a raft of economic stimulus measures.
The Hang Seng Index has rocketed more than 20 percent over the past seven trading sessions, with developers leading the charge higher as officials target the property sector.
Among the standout performers were Agile Group, which soared an blistering 160 percent, while Sunac added more than 75 percent and Fantasia 118 percent. However, the firms were still at just a fraction of their prices three years ago.
The measures China has unveiled include interest rate cuts, an easing of home-buying rules and a cut to banks' reserve requirement ratio -- the amount of cash they must hold in reserve -- allowing them to lend more.
Markets were closed in Shanghai and Shenzhen for a week-long holiday, having also zoomed higher before the break.
The rally in Hong Kong "seems to show that both local and foreign investors remain optimistic about this rebound and that the short-term rally might be sustained", Kenny Ng, a strategist at Everbright Securities International, told AFP.
He warned of a short-term pullback but added: "The strength and comprehensiveness of the central government's stimulus this time were beyond expectations.
"The cuts to the interest rate and the reserve requirement ratio went beyond the minimum, and the policies were wide-ranging, not only monetary policy but also policies on the property market and capital markets."
There were gains in Singapore and Manila, while London, Paris and Frankfurt were also in the green in the morning.
But there were losses in Sydney, Seoul, Wellington, Bangkok and Jakarta.
Tokyo fell more than two percent, continuing its volatile run on a strong yen after Shigeru Ishiba's election Friday as head of Japan's ruling party.
Ishiba, sworn in as prime minister Tuesday, has said he backs the central bank's interest rate hikes and was eyeing possible corporate tax increases.
Dealers are also awaiting the release of key US jobs data at the end of the week, hoping for a fresh idea about the state of the economy and the Federal Reserve's plans for borrowing costs after last month's bumper cut.
- Key figures around 0810 GMT -
West Texas Intermediate: UP 2.8 percent at $71.76 per barrel
Brent North Sea Crude: UP 2.6 percent at $75.48 per barrel
Hong Kong - Hang Seng Index: UP 6.2 percent at 22,443.73 (close)
Tokyo - Nikkei 225: DOWN 2.2 percent at 37,808.76 (close)
London - FTSE 100: UP 0.4 percent at 8,310.71
Shanghai - Composite: Closed for a holiday
Euro/dollar: DOWN at $1.1065 from $1.1067 on Tuesday
Pound/dollar: UP at $1.3287 from $1.3279
Euro/pound: DOWN at 83.28 pence from 83.34 pence
Dollar/yen: UP at 144.15 yen from 143.57 yen
New York - Dow: DOWN 0.4 percent at 42,156.97 (close)
dan/mtp
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