Equity markets held their ground but world oil prices spiked on Monday after Hamas launched a shock deadly attack on Israel, which has declared war on Gaza, sparking fear of an escalating conflict in the crude-rich Middle East.

Benchmark oil contracts Brent and WTI soared more than five percent in early Asian deals before easing back slightly, recovering some of the past week's dip.

The worsening crisis sent shockwaves through global equity markets, although energy companies were boosted by higher oil prices which lift their profits and revenues.

The dollar, yen and Swiss franc, as well as gold, won strong support as they benefited from their status as a haven investment in times of heightened geopolitical turmoil.

But a number of airlines saw their shares take a large hit with a slew having suspended Israel-bound services for the time being.

Air France-KLM slumped 8 percent while IAG, owner of British Airways, Iberia, Vueling and Aer Lingus, brought up the rear on the London market with a 6 percent nosedive as Germany's Lufthansa dropped 4.3 percent. Low-cost carrier Easyjet also fell.

"The surprise attack by Hamas has fueled concerns about further instability in the Middle East which could in turn disrupt oil flows at a time when the market is already extremely tight and prices are high," said Craig Erlam, senior market analyst with OANDA.

For Stone X analyst Fawad Razaqzada, with markets now in "risk off" mode, "investors are worried that the retaliation by Israel is going to be -- as it has already -- severe and will raise the tensions between Israel and many other countries around the region, including, of course, Iran." (AFP)