The U.S. military on Friday released a video it said shows Iran's Revolutionary Guard removing an unexploded limpet mine from one of the oil tankers targeted near the Strait of Hormuz, suggesting the Islamic Republic sought to remove evidence of its involvement from the scene. Iran denies being involved.
"The attack on two oil tankers in the Gulf of Oman has raised the geopolitical temperature even further in the region, at a time when it is high already, given the strained relations between the U.S. and Iran," said Michael Hewson, chief market analyst at CMC Markets.
In Europe, Germany's DAX tumbled 0.8% to 12,069 in midday trading. Britain's FTSE 100 fell 0.5% to 7,328 and France's CAC 40 also dipped 0.5% to 5,348. U.S. shares were set to drift lower after gains in energy and internet companies on Tuesday helped snap a two-day losing streak on Wall Street in a choppy week of trading. Future contracts for the Dow were down 0.2% to 26,075, while the same for the S&P 500 fell 0.3% to 2,890.
Earlier, Japan's benchmark Nikkei 225 edged up 0.4% to finish at 21,116.89. Australia's S&P/ASX 200 rose 0.2% to 6,554.00. South Korea's Kospi lost 0.4% to 2,095.41. Hong Kong's Hang Seng slipped 0.7% to 27,118.35, while the Shanghai Composite fell nearly 1.0% to 2 2,881.97.
Investors have been searching for direction as they cautiously await any new developments in the trade war between the U.S. and China. Any continued escalation could crimp global economic growth and halt what is poised to be the longest economic expansion in U.S. history.
The market is also looking ahead to next week's meeting of policyholders of the U.S. Federal Reserve. Last week, Fed Chair Jerome Powell set off a market rally after he signaled that the central bank is willing to cut interest rates to help stabilize the economy if the trade war between Washington and Beijing starts to reduce growth.
ENERGY: Benchmark U.S. crude slipped 7 cents to $52.21. It rose 2.2% to settle at $52.28 a barrel Thursday. Brent crude oil, the international standard, gained 12 cents to $61.43 a barrel. CURRENCIES: The dollar fell to 108.23 yen from 108.44 yen on Thursday. The euro weakened to $1.1263 from $1.1294.