By DAVID McHUGH and JIANG JUNZHE, Associated Press

FRANKFURT, Germany (AP) — Oil surged, stocks fell and investors sought safety in the U.S. dollar and government bonds Friday after Israel struck Iranian nuclear and military targets in an attack that raised the risk of all-out war between them.

U.S. benchmark crude oil rose by $4.97, or 7.3%, to $72.91 per barrel. Brent crude, the international standard, increased by $4.78 to $74.15 per barrel, a gain of 6.67%

Oil prices are likely to rise in the short term but the key question is whether exports are affected, said Richard Joswick, head of near-term oil at S&P Global Commodity Insights. “When Iran and Israel exchanged attacks previously, prices spiked initially but fell once it became clear that the situation was not escalating and there was no impact on oil supply,” he wrote in an emailed analysis.

“Oil price risk premiums could rise sharply if Iran conducts broader retaliatory attacks, especially if on targets other than in Israel,” Joswick said.

China is the only customer for Iranian oil but could seek alternative supplies from Middle Eastern exporters and Russia, he said.

Iran’s oil trade is restricted by Western sanctions and import bans, and Israel exports only small amounts of oil and oil products.

Futures for the S&P 500 fell 1.2% ahead of the U.S. market open while those for the Dow Jones Industrial Average lost 1.2%. In Europe, Germany’s DAX dropped 1.4% to 23,437.61, and the CAC 40 in Paris gave up 1% to 7,685.89. Britain’s FTSE 100 slipped 0.5% to 8,840.95.

The yield on the 10-year Treasury fell to 4.35% from 4.41% late Wednesday and from roughly 4.80% early this year.

In currency trading early Friday, the U.S. dollar gained 0.3% against the Japanese yen, to 143.93 yen, and 0.47% against the euro, which eased to $1.153. The yield on U.S. 10-year Treasurys fell 0.01 percentage point to 4.347%; bond yields and prices move in opposite directions.

Treasurys and the dollar often rise when investors fell less inclined to take risks.

In Asia, Tokyo’s Nikkei 225 fell 0.9% to 37,834.25 while the Kospi in Seoul edged 0.9% lower to 2,894.62. Hong Kong’s Hang Seng retreated 0.6% to 23,892.56 and the Shanghai Composite Index lost 0.8% to 3,377.00. Australia’s S&P/ASX 200 drifted 0.2% lower to 8,547.40.

“An Israeli attack on Iran poses a top ten of our global risk, but Asian markets are expected to recover quickly as they have relatively limited exposure to the conflict and growing ties to unaffected Saudi Arabia and the UAE,” said Xu Tiachen of The Economist Intelligence.

On Thursday, U.S. stock indexes ticked higher following another encouraging update on inflation across the country. The S&P 500 rose 0.4%, the Dow Jones Industrial Average added 0.2% and the Nasdaq composite gained 0.2% to 19,662.48.

Stocks broadly got some help from easing Treasury yields in the bond market following the latest update on inflation, taken as a signal that the Federal Reserve will have more leeway to cut interest rates later this year in order to give the economy a boost.

The Federal Reserve has been hesitant to lower interest rates, and it’s been on hold this year after cutting at the end of last year, because it’s waiting to see how much President Donald Trump’s tariffs will hurt the economy and raise inflation.

The Fed’s next meeting on interest rates is scheduled for next week, but the nearly unanimous expectation on Wall Street is that it will stand pat again. Traders are betting it’s likely to begin cutting in September, according to data from CME Group.

Trump’s on-and-off tariffs have raised worries about higher inflation and a possible recession, which had sent the S&P 500 roughly 20% below its record a couple months ago. But stocks have since rallied nearly all the way back on hopes that Trump will lower his tariffs after reaching trade deals with other countries.

Jiang Junzhe reported from Hong Kong.