Markets fall on US-Iran tensions

Shares in Japanese microchip makers fell amid US fears

Global stock markets have fallen after the US accused Iran of harassing its navy ships - raising worries of geopolitical instability.

The UK's FTSE 100 index erased earlier gains, ending down 9 points, or 0.1%, to 6,339.5, while New York's Dow Jones index slipped before ending higher.

Sentiment is fragile after US jobs data for December showed unemployment at a two-year high.

Asian shares fell earlier on Monday on concerns US woes could hurt exporters.

"We've had a huge barrage of very bearish statistics last week from the US and it's obviously weighing on the market," said Edmund Shing, strategist at BNP Paribas in Paris.

"The question this week is are we ready for a short-term bounce, or are we going to crack through the support levels and go further down? My view is that we'll get a small bounce because we're getting oversold on a number of indices," he said.

In volatile trade, the Dow Jones index ended up 27.31 points, or 0.21%, at 12,765.71 while the tech-heavy Nasdaq lost 5.19 points, or 0.21% at 2,499.46.

Fragile sentiment

The US is Asia's biggest export market and fears exist that a slowdown in the world's largest economy will hurt the region's exporters and subsequently economic growth.

Hong Kong's Hang Seng index fell 2.7%, closing at 26.776.5 points , while Tokyo's main Nikkei index shed 1.3% and ended at 14,500.5 points having touched a 17-month low during earlier trade.

Asian exporters, such as microchip firms, were hit by Friday's jobs data, with Tokyo Electron falling 2.8%.

Markets across the region suffered as investors sold shares considered risky, and bought Japanese and US government bonds, seen as safe havens in times of uncertain economic growth.

Taiwan's main index shed 4.1%, while Australian and Singapore markets fell by more than 2% each.

"The sluggish jobs data is reinforcing concerns that the sub-prime mortgage crisis is pushing the US economy towards a recession," said Kim Young-gak, an analyst at Hyundai Securities.

The US Federal Reserve is likely to cut interest rates this month, he said, as part of efforts to boost the country's housing market and lift confidence in global economic growth.