(Changes dateline to London, updates throughout, adds quote)

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Israel hits Iran nuclear facilities, missile factories.

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Crude surges as much as 14% on supply risks

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Wall Street futures slump over 1.5%, European stocks down

By Dhara Ranasinghe and Kevin Buckland

LONDON, June 13 (Reuters) - World stock markets tumbled

on Friday and oil prices surged as Israel launched a military

strike on Iran, sparking a rush into safe havens such as gold,

dollar and Swiss franc.

An escalation in the Middle East - a major oil-producing

region - adds uncertainty to financial markets at a time of

heightened pressure on the global economy from U.S. President

Donald Trump's aggressive and erratic trade policies.

Market reaction was swift.

Crude oil jumped as much as 14% at one point to almost $79 a

barrel, before pulling back to around $74 -- still up

more than 5% on the day and set for the biggest one-day jump

since 2022. U.S. oil futures rose over $5 t0 $73.14.

Gold, a classic safe-haven at times of global

uncertainty, rose to $3,416 per ounce, bringing it close to the

record high of $3,500.05 from April.

The rush to safety was matched by a dash out of risk assets.

U.S. stock futures fell over 1.5% , European

shares dropped 1% at the open and in Asia, major

bourses in Japan, South Korea and Hong Kong fell over 1% each.

"Clearly the big question is how far does this go?," said

Chris Scicluna, head of economic research at Daiwa Capital

Markets in London, referring to the Middle East tension.

"The market has got it right in terms of stocks down, oil

and gold up."

Israel launched wide scale strikes against Iran, saying it

targeted nuclear facilities, ballistic missile factories and

military commanders during the start of a prolonged operation to

prevent Tehran from building an atomic weapon.

Iran had launched about 100 drones towards Israeli territory

in retaliation, which Israel is working to intercept, an Israeli

military spokesman said.

Washington said it was not involved in the Israeli

offensive.

The developments mean another major geopolitical tail risk

has now become a reality at a time when investors are wrestling

with major shifts in U.S. economic and trade policies.

"The geopolitical escalation adds another layer of

uncertainty to already fragile sentiment," said Charu Chanana,

chief investment strategist at Saxo, adding that crude oil and

safe-haven assets will remain on an upward trajectory if

tensions continue to intensify.

The Israeli shekel fell almost 2% and long-dated

dollar bonds for Israel, Egypt and Pakistan slipped.

SAFE-HAVEN RUSH

U.S. Treasuries were bought in the rush for safer assets,

sending the yield on 10-year notes to a one-month

low of 4.31%. Bond yields move inversely to prices.

Germany's 10-year bond yield touched its lowest level since

early March at around 2.42%.

Daiwa's Scicluna said a further push higher in oil prices

could dampen expectations for central bank rate cuts.

"The ultimate response in bond markets to geopolitics is

going to depend on how sharp the rise in energy prices is going

to be," he said.

Some traders were attracted to the dollar as a haven, with

the dollar index up 0.6% to 98.277, retracing most of

Thursday's sizeable decline.

Still, the dollar is down 1% for the week in a sign that

sentiment towards the greenback remains bearish.

The Swiss franc briefly touched its strongest

level against the dollar since April 21, before trading 0.2%

lower at around 0.8118 per dollar.

Fellow safe haven the Japanese yen edged down 0.2%

to 143.79 per dollar, giving up earlier gains of 0.3%.

The euro was down 0.4 percent at $1.1534, after

rising on Thursday to the highest since October 2021.

Sterling slipped 0.4% to $1.3556, after marking a

fresh high since February 2022 at $1.3613 early in the day.

"Traders are now on edge over the prospects of a full-blown

Middle East conflict," said Matt Simpson, a senior market

analyst at City Index.

"That will keep uncertainty high and volatility elevated."