By Scott Murdoch

SYDNEY (Reuters) – Asian share markets dropped and safe haven assets such as gold rose on Tuesday, as investors contemplated the implications of a potential imminent Russian invasion of Ukraine.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.5% after stock markets in the United States and Europe lost ground on Monday.

fell 0.91% while in Australia, the S&P/ASX200 closed down 0.51%.

Hong Kong’s slid 1.1% although China’s CSI300 Index bucked the sell-off across the region and was up 0.7%.

“Geopolitical risk will be the clear driver of sentiment for markets this week,” said Marcella Chow, global markets strategist at JPMorgan (NYSE:) Asset Management.

“The broader risk appetite among investors is going to be under pressure and as a result we expect to see a flight to safety in gold, U.S. dollars and longer-term Treasuries.”

The negative tone in Asia was set to be replicated in equities markets across the world on Tuesday.

In early European trades, pan-region were off 0.32% at 4,039, German eased 0.31% to 15,033 and futures down 0.31% at 7,448.5.

U.S. stock futures, the , were down 0.07% at 4,391

The share market sell-off driven by risk aversion helped push gold to an eight-month high as investors sought shelter in the traditional safe haven asset.

was up 0.4% at $1,877.72 per ounce.

“In the near term there will be support for gold because of the uncertainty of a potential military conflict,” Jack Siu, Credit Suisse (SIX:)’s chief investment officer for Greater China, told Reuters.

“It can be a hedge but the overall fundamentals of central banks hiking rates and a firming dollar in the next few weeks and months are negative factors for gold.”

Oil shot to the highest level in seven years in U.S. trading on Monday on Russia-Ukraine tensions but weakened slightly during the Asian session.

The United States warned on Monday that Russia could soon invade Ukraine. Secretary of State Antony Blinken said the U.S. embassy would be relocated from Kyiv to Lviv, citing the “dramatic acceleration in the buildup of Russian forces”

“There are concerns about the possibility of the biggest military action in Europe since the Second World War,” said James Rosenberg, EL&C Baillieu financial adviser.

“So far, the market is just keeping a watchful eye and it doesn’t appear to have had much impact. This could change dramatically if the Russians do attack Ukraine.”

The Group of Seven large economies (G7) warned of “economic and financial sanctions which will have massive and immediate consequences on the Russian economy”.

Global index provider MSCI Inc said it was monitoring developments in Ukraine and access to the Russian equity market.

The yield on benchmark was at 1.9753% compared with its U.S. close of 1.996% on Monday. The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 1.5589% compared with a U.S. close of 1.589%.

Despite the Russia-Ukraine tensions, futures markets are still pointing towards a high likelihood of the Federal Reserve raising interest rates at its March meeting.

“Global financial markets are caught in a pincer movement between geopolitics (Ukraine) and high inflation,” ANZ economists wrote in a note.

dipped 0.6% to $94.92 a barrel during the Asian session after notching a seven-year high. was down 0.5% at $96.02 per barrel.