The MSCI world equity index slipped 0.2% and was off about 2% from a 30-month peak set in February. The index is still up about 3% since the start of the year.
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U.S. stocks were slightly higher as upbeat labor market data offset further gains in oil prices.Also, in a flight to safety the dollar fell to a record low against the Swiss franc, while U.S. Treasury prices were lower.
Investors were nervous that political instability could spread to major oil producer Saudi Arabia, a central U.S. ally in the region.
"If it continues to spread, Middle East tensions may reach a point where a war could start and that could ignite an incredible rally (in oil prices)," said Ryoma Furumi, a commodities sales manager at Newedge Japan.
Forces loyal to Muammar Gaddafi launched a major offensive against rebels in eastern Libya, sparking a rebel warning that foreign military help might be needed to "put the nail in his coffin" and end Gaddafi's long rule.
Saudi Arabia's stock markets declined for a 13th session and hit a 22-month low, while Dubai equities fell to a 6-1/2 year low, reflecting investor worries over planned protests in Saudi Arabia."We are seeing a significant elevation in risk premiums, with investors revising their expectations for the region," said Hashem Montasser, managing partner at Frontlane Capital, a Dubai-based asset management firm.
"The earnings outlook is very unclear."
Saudi Arabia's benchmark stock index .TASI fell nearly 4% at one point to a fresh 22-month low.
At the same time, gold hit a record high above $1,436 an ounce, building on a 6% rise in February, its biggest one-month climb since August.
Brent crude for April delivery rose 0.4% to $115.83 a barrel on Wednesday. The contract settled up $3.62, or 3.24%, at $115.42 a barrel on Tuesday, its highest close since August 2008.U.S. crude for April delivery rose 1 percent to $100.66 early Wednesday.
In the U.S. stock market, the Dow Jones industrial average .DJI rose 26.83 points, or 0.22%, at 12,084.85. The Standard & Poor's 500 Index .SPX was up 3.23 points, or 0.25%, at 1,309.56. The Nasdaq Composite Index .IXIC added 11.63 points, or 0.42% at 2,749.04.
In Europe, the FTSEurofirst 300 index .FTEU3 fell 0.6%.
The benchmark 10-year U.S. Treasury note was down 8/32, its yield at 3.43%, up from 3.40% on Tuesday, while the Swiss franc soared to a record high versus the dollar.