LONDON (Reuters) -Investors' worst-case scenario of a full-blown Middle East conflict is coming into view, unleashing a flood of capital out of risk assets and into classic safe-havens, topped once more by the dollar.

Israel on Friday said it had launched a strike against nuclear facilities and missile factories in Iran and killed a swathe of military commanders in what could be a prolonged operation to prevent Tehran building an atomic weapon.

Oil, which accounts for roughly 30% of global energy demand, soared - gaining almost 14% at one point - along with gold, while government bond yields fell briefly. Shares, near record highs, also declined, led by airlines.

"This is a dangerous situation," said Francois Savary, chief investment officer at Genvil Wealth Management in Geneva. "This is one of those situations where everything is under control and then everything is not under control."

Iran is one of the world's largest exporters of crude. It also borders the Strait of Hormuz, a critical choke-point through which roughly a fifth of daily global consumption flows and which Iran has previously threatened to close in retaliation to Western pressure.U.S. President Donald Trump suggested Iran, which promised a harsh response, had brought the attack on itself by resisting U.S. demands in talks to restrict its nuclear programme, and urged it to make a deal, "with the next already planned attacks being even more brutal".

In markets, focus returned the real-world implications of the flare-up.

Investors and central banks alike have been wrestling with the direction of interest rates from here, given the likely upward hit to consumer prices and growth from U.S. tariffs.

Friday's strikes by Israel added to that dilemma, given the surge to 5-1/2 month highs in the oil price. U.S. Treasuries struggled to gain much of a safe-haven tailwind, leaving 10-year yields holding steady on the day around 4.36%.

DOLLAR BACK

The dollar, which for weeks has borne the brunt of investor risk aversion, again took up the mantle of ultimate safe haven.

"The dollar is reverting to that traditional role of safe haven, which we haven't seen for months," City Index strategist Fiona Cincotta said.

"We've got the equities markets coming lower in the safe-haven, risk-off trade and giving the dollar some much-needed boost from the lows that it was trading at."

The S&P 500 fell 0.7% in early trade on Friday, but remained near record highs struck in February.

The dollar, which is down 10% against a basket of six others this year, has traded virtually in lockstep with stocks since Trump's April 2 "Liberation Day" unveiling of tariffs and subsequent erratic approach to trade policy that has shattered confidence in U.S. assets.

That relationship began to erode on Friday, as investors embraced the dollar at the expense of stocks, crypto, industrial commodities and currencies such as the safe-haven Swiss franc and yen.

OIL SLICK

Brent crude oil prices were last up 7% at $75.54 per barrel, were set for their biggest one-day jump since 2022, when energy costs spiked after Russia's invasion of Ukraine. "If we see oil prices moving towards $80 and above then that becomes more of an issue for global central banks," said Chris Scicluna, head of economic research at Daiwa Capital Markets.

Marlborough fixed income fund manager James Athey said there was a risk investors may be too quick to take a lack of ratcheting-up in tensions as a green light to dive back into things like stocks.

"In general, markets tend to look through these sorts of events quite quickly but of course therein lies the risk of complacency," he said.

"The situation is genuinely tense and fraught and risk assets are still priced for perfection," he said.