Asian and European markets tumbled Wednesday on fears of continued Egyptian political unrest and uncertainty over the fate of the Portuguese ruling coalition.
Global oil prices hit a 14-month high, with the light sweet crude traded in New York topping $102 a barrel. Investors worried that the crisis in Egypt could affect Middle East oil shipments through the Suez Canal, a key transit point.
Hong Kong's Hang Seng index plunged 2.5 percent, while markets in London, Frankfurt and Paris all ended down more than 1 percent. U.S. shares are ahead slightly in abbreviated trading a day ahead of the country's Independence Day celebration.
European traders were especially worried about the political uncertainty in debt-ridden Portugal, after two key government ministers resigned this week in protest of Lisbon's austerity measures endorsed by Prime Minister Pedro Passos Coelho. Interest rates on government bonds soared on fears his government might collapse, while shares on Lisbon's stock exchange plummeted more than 5 percent.
One official at Portugal's Carregosa Bank, Joao Leite, said investors are worried about the uncertainty.
"This is the worst case for investors, not knowing what's going to happen. It would be better for the markets knowing that we are going to have elections on a new term, rather than not knowing what's going to happen and seeing the prime minister trying to address the situation, saying that he thinks he is going to manage to keep the coalition alive. This is the worst situation for investors. The worst is when you do not know what to expect."
Aside from the new turmoil, the global economy has already been hampered by a slow economic recovery in China, the world's second largest economy, and a recession in Europe. Investors are also nervous about what a key U.S. jobs report due out Friday will show.
A survey showed that growth in China's services sector, an industry of growing importance in the country, fell in June to its slowest pace in nine months.