Investors make a dash for cash as Iran crisis upends markets.

Cash became king in global ⁠markets ⁠on Tuesday as an escalation in the Middle East ⁠conflict dragged down gold, bonds and stocks synchronously, upending the normal interplay between safe and riskier assets and driving up volatility.

The ​turnaround in market sentiment, which just a day earlier was premised on a swift end to the conflict, came as Israel attacked Lebanon, and Iran responded with strikes against energy infrastructure in Gulf ‌countries and tankers in the Strait of Hormuz, through ‌which a fifth of the world’s energy passes.

Aside from higher oil prices and the U.S. dollar, most major stock markets, Treasuries and other bonds and even safe-haven gold were sold.

“What is ⁠happening is a classic ⁠response to an event that has a lot of uncertainty,” said Michael Arone, chief investment strategist at State ​Street Investment Management in Boston.

The decline in gold prices - they were down 4% after being at four-week highs on Monday - showed the indiscriminate nature of the selling, Arone said.

“Oil, and the dollar, are the only two things that people want to own right now,” he said.

Brent crude gained nearly 7%, while the U.S. dollar posted sharp gains, hitting multi-month peaks against the euro, sterling and yen.

Bonds and stocks moved ​in sync. Wall Street’s main indexes fell more than 2% on Tuesday, with the S&P 500 hitting its lowest in over two months, while the two-year U.S. ⁠Treasury ⁠yield hit 3.599%, its highest since late ⁠January.

Market analysts pointed to a host of ​factors driving the de-risking behaviour, including complacency about the conflict, extreme positioning in the weeks leading up to Saturday’s attacks on Iran, and the hit ​to bonds from the inflationary impulses higher oil would ⁠generate.

“History tells us that, in periods of stress, the correlation of cross-asset volatility tends towards one,” said George Adcock, head of trading and the deputy portfolio manager of Kohinoor Strategy at 36 South Capital Advisors.

Developments in the Middle East had caused investors to price various outcomes in markets, leading to a spike in volatility and pressure on extended positions in assets such as oil, gold and the dollar, Adcock said.

“During January we observed entrenched negative narratives, extreme positioning and subdued volatility. These factors are now unwinding reflexively that is leading to a significant VAR and correlation ⁠shock across many portfolios,” he said.

A VAR or value-at-risk shock typically occurs when selling is contagious across market sectors, breaking down the inverse ⁠correlations that had diversified risks and protected parts of investor portfolios.

LSEG Lipper data showed global money market funds received $47.9 billion in inflows, the highest since February 17, as investors sought refuge in short-term cash-like instruments.

By contrast, investors reduced exposure to equities, pulling $9.6 billion from U.S.-focused equity funds, while global equity funds witnessed an outflow of $9.1 billion on Monday, the highest in more than two months.