World shares and the dollar tumbled on Friday and oil and gold jumped after U.S. President Barack Obama authorized targeted air strikes in Iraq, stoking fears of another drawn-out conflict in the region.

Fighting also resumed in Gaza between Palestinian militants and Israel while NATO's calls for Russia to "step back from the brink" of war in Ukraine were still ringing in ears of volatile markets.

"Earlier this week, one Iraqi in the area cried to the world, 'There is no one coming to help'," said Obama, who has been reluctant to go back into Iraq having withdrawn in 2011. "Well, today America is coming to help."

Global share markets had already been heading for a second week of straight losses but the latest developments sparked a fresh sell-off.

European stocks were down almost 1 percent by mid-morning after similar falls in Asian markets overnight. Futures markets pointed to a 0.5 percent drop for Wall Street when trading restarts.

"Risk aversion reigns, risk aversion rules," said Kit Juckes, Head of Currency Strategy at Societe Generale in London.

"The prospect of air strikes in northern Iraq on top of the tensions in Ukraine and Gaza ... across the board we have stocks weaker, bonds are stronger, the dollar is weaker and the yen is strongest of all."

Obama said in an address that he authorized "targeted" strikes to protect the besieged Yazidi minority and U.S. personnel in Iraq.

U.N. Secretary-General Ban Ki-moon and the United Nations Security Council also called for the international community to help Iraq's government and people as the country struggles against a sweeping advance by Islamist militants.

OIL PRESSURE

The intensifying risks in one of the world's big oil-producing countries delivered an immediate jolt to oil markets, sending U.S. crude up more than $1 to $98.45 a barrel and Brent to $106.39.

Brent spiked above $115 in mid-June on fears that violence in Iraq would disrupt oil supplies, but fell back as it become clear the fighting remains well away from the main oil fields in the south. In late-night remarks televised from the White House to a war-weary American public, Obama insisted he would not commit ground forces and had no intention of letting the United States "get dragged into fighting another war in Iraq."

But markets were pondering the possibility of just that.

The dollar fell 0.4 percent to two-week low of 101.68 against the safe-haven yen and the yields on 10-year Treasuries and German Bunds - global investors' tradition go-to assets in times of tension - dropped as low 2.375 and 1.026 percent respectively.

Events in Iraq and the economic sanctions and tensions over Ukraine have "an impact on confidence and this is what you have to watch," said Didier Duret, chief investment officer at ABN Amro.

These "may force the Federal Reserve to hold off on policy tightening and could also push the European Central Bank to be more proactive in Europe," he said.

RUSSIAN BOUNCE

Stronger-than-expected export growth from China did little to offset the broader sense of nervousness.

Gold, another safe haven, hit $1,318.80 an ounce, its highest since July 18 as headed for a weekly rise of almost 2 percent. The yen was up 1 percent, German Bund yields have hit a string of record lows this week while world stocks have lost more than 4 percent over the last two.

"It seems only a short time ago that traders were talking corrections, but now it seems only a matter of time before we see technical bear markets" in some assets, IG chief market strategist Chris Weston wrote in a note to clients.

Among the few markets to buck the trend were Russian stocks, up for the first time in seven sessions, albeit firmly on course for a fourth week of back-to-back falls.

The rouble, however, was hovering at a four and half month low against the dollar and the cost of insuring against a Russian debt default rose to a three-month high on concerns about the potentially escalating sanctions tussle with the West.