NEW YORK: World markets took a hit yesterday as investors recoiled from risk and piled into dollars, with fears of a Dubai debt default serving as a sharp reminder of the turmoil created by the global financial downturn.

The crisis flared after Dubai asked to delay payment on billions of dollars of debt issued by conglomerate Dubai World and its main property subsidiary Nakheel. Oil, gold, base metals and agricultural commodities felt the backdraft as investors lightened exposure to assets perceived as higher risk on worries about global contagion, lifting the dollar against a basket of currencies. US and Asian stock markets tumbled while Europe shares recovered slightly.

Earlier, oil prices slumped over two per cent to nearly $76 a barrel. Gold pulled back above $1,170 per ounce from a one-week low of $1,136.80 in bullion trading.

British Prime Minister Gordon Brown played down the Dubai debt crisis saying it was containable and localised while his Russian counterpart Vladimir Putin said the problem once again showed it would be tough for the world to come out of the financial crisis.

Full report - Pages 20-21