World Stock Markets Driven Down as Obama Orders US Airstrikes on Islamic State in Iraq

World stock markets dropped as nervous investors pulled money out amid an intensification of geopolitical crises surrounding Ukraine and Iraq.

US President Barack Obama authorised airstrikes on the Islamic State jihadists in Iraq and Russia hit back against the West's sanctions over its activity in Ukraine with its own.

Japan's Nikkei 225 lost almost 3% after Obama's speech and Russia's sanctions on the West, while the FTSE 100 had been clipped of 0.58% in the first few hours of trading.

The S&P 500 in the US closed down 0.56%. France's CAC 40 fell 0.3%, while India's S&P Bombay Stock Exchange lost more than 1%. Most major markets were down. Sterling was down against most major currencies, including the dollar and euro.

"Overnight sentiment soured quickly on news of US airstrikes in Iraq, sending Asian stocks sharply lower," said Mike van Dulken, head of research at Accendo Markets.

"All that is except Hong Kong and China, which benefited from much stronger than expected Chinese trade data, which blew consensus expectations right out of the water.

"Without such a diverse backdrop of conflict this would normally see global markets rally on the prospect of the world's number two economy on a recovery path."

Heavily armed Islamic State militants are on the march in northern Iraq having seized several key cities in the country, as well as parts of war-torn Syria.

There are concerns that Kurdish oil fields are now at risk of attack by Islamic State, which is using US-made weapons and war machinery taken from the fleeing Iraqi Army.

And the Yazidi minority group in Iraq has been driven into the mountains by Islamic State, who are threatening to massacre them in what Obama said has the potential for genocide.

"I directed our military to take targeted strikes against ISIS terrorist convoys should they move toward the city," Obama said in a Washington speech.

"We intend to stay vigilant and take action if these terrorist forces threaten our personnel or facilities anywhere in Iraq, including our consulate in Erbil and our embassy in Baghdad.

"When we face a situation like we do on that mountain with innocent people facing the prospect of violence on a horrific scale ... then I believe the United States of America cannot turn a blind eye. We can act, carefully and responsibly to prevent a potential act of genocide."

Meanwhile, Russian President Vladimir Putin authorised a series of sanctions against Western exporters of goods to his country, including foodstuffs.

This is in response to economic and financial sanctions on Russia imposed by the European Union (EU) and US, among others. Russia was being penalised by the West for annexing the Ukrainian region of Crimea after protests in the country ousted Kremlin-allied President Viktor Yanukovich, who is now in hiding.

And it was being punished for arming and supporting pro-Russian separatists in the east of Ukraine, who are battling with government forces to split from Kiev rule. It is thought that the rebels are behind the shooting down of a Malaysian Airlines passenger plane over separatist-held Donetsk in Ukraine, killing all 298 civilians on board.