HONG KONG - Asian markets mostly fell and oil prices rallied on Wednesday on fears that the Israel-Hamas conflict could spill over into a regional war after a blast at a Gaza hospital dealt a blow to President Joe Biden's diplomatic drive.
Markets had enjoyed a healthy run Tuesday on optimism that while Israeli Prime Minister Benjamin Netanyahu was preparing for a ground offensive in the blockaded territory, the crisis could be contained.
Gaza's health ministry blamed Israel for the hospital explosion, but Israel said it was caused by a rocket misfired by Hamas ally Islamic Jihad.
Biden had planned to visit Israel and Jordan on Wednesday to talk to Netanyahu as well as Jordanian King Abdullah II, Palestinian leader Mahmud Abbas and Egyptian President Abdel Fattah al-Sisi in hopes of finding a way to de-escalate.
But news that at least 200 people had been killed at the hospital saw the Arab leaders cancel their summit in Amman and fanned concerns of a regional conflagration, with Iran warning this week that a wider war was becoming "inevitable".
There was an increase in fighting between Israeli troops and Tehran-backed Hezbollah on the Lebanon border.
"The whole region is at the brink of falling into the abyss that this new cycle of death and destruction is pushing us towards," King Abdullah II said following talks with German Chancellor Olaf Scholz in Berlin on Tuesday.
"The threat of this war expanding is real."
Asian markets mostly fell, with Hong Kong, Shanghai, Singapore, Mumbai, Jakarta, Taipei and Manila all down, along with London, Paris and Frankfurt.
Sydney, Seoul, Wellington and Bangkok edged up. Tokyo was flat.
Crude jumped more than two percent at one point on worries about supplies from the oil-rich region in the event of a wider war, with some observers even warning the commodity could head towards $150 a barrel.