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Oil prices leapt to record highs as Israel warned about Iranian nuclear sites and the dollar slumped on the biggest jump in US unemployment for 22 years.
Global crude ended a run of lower prices as it jumped by more than $9 a barrel to $136.79 - it has risen more than $14, or 10 per cent, in two days. The week before last saw a high of $135.09 a barrel, but by last Wednesday prices had receded to as low as $122.
Already jittery oil markets were sent into spasm by remarks from Israel's transport minister that an attack on Iranian nuclear sites looked "unavoidable". Any attack on the country would threaten supplies from the whole region.
Prices were also boosted by a prediction from investment bank Morgan Stanley that crude may reach $150 by July 4.
Earlier, the dollar had fallen against the euro partly on speculation that the European Central Bank may consider raising interest rates to curb inflation. Then markets were rocked by a report showing unemployment suffered its biggest monthly rise for 22 years.
Shares dived after the US unemployment rate unexpectedly jumped to 5.5 per cent, intensifying fears that the world's biggest economy is sliding into recession. The Dow Jones industrial average lost nearly 300 points, or 2.2 per cent, to around 12,320. In London, the FTSE 100 closed the week down 1.5 per cent, or 88 points, at 5,906.
The US Labour Department said non-farm payrolls fell by 49,000 in May from the month before. That was broadly in line with expectations but the department revised its April figure to show a drop of 28,000 rather than the 20,000 estimate it made last month.
The unemployment rate jumped from five per cent in April to 5.5 per cent, the biggest rise since February 1986 and the highest rate since October 2004. As stocks tumbled, so did the dollar, which shed nearly a cent against the euro.
Bond prices moved sharply higher as expectations of any near-term increase in interest rates subsided. Gold futures jumped two per cent, to $891 an ounce as investors, taking fright, sought a safe haven.
There were substantial job losses last month in construction industries, where 34,000 cuts were made, in manufacturing, where 26,000 jobs were lost, and among providers of professional services, where 39,000 jobs went.
"The overall trend is clearly weakening, with the unemployment rate having increased by a full percentage point over the past 12 months," said James Knightley, an economist at ING Financial Markets.
