NEW YORK (MarketWatch) — Stocks are down hard, gold is back in bull-market territory and oil is at a six-month high. Tuesday’s market turmoil isn’t all about Syria, but the growing likelihood of a U.S.-led military strike against the regime of Bashar al-Assad certainly added to global market turmoil on Tuesday.

British Prime Minister David Cameron on Tuesday called last week’s apparent chemical attack by the Assad regime’s military on civilians in the Damascus suburbs appalling. “I don’t believe we can let that stand,” he said, according to the BBC.

His remarks were the latest by Western officials pointing to the likelihood of intervention in Syria’s civil war. Syria’s foreign minister on Tuesday said the country would use “all means available” to defend itself in the event of a U.S. strike. This comes a day after U.S. Secretary of State John Kerry said there was no doubt the Assad regime’s military had used chemical weapons against civilians last week. See: 5 quick links on the Syria conflict.

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Syria sparks flight to bonds, gold

Chris Dieterich joins the News Hub with a look at today's market action, including three stocks to watch today. Photo: Getty Images.

Here’s the market situation:

U.S. stocks, which slumped at the opening bell, traded near the day’s lows early afternoon, as concerns about Syria combined with growing fears over the potential for another round of political brinkmanship in Washington over the federal debt ceiling. The Dow Jones Industrial Average DJIA -0.93% was down 127.35 points, or 0.9%, at 14,819.11, while the S&P 500 SPX -1.33% lost 19.53 points, or 1.2%, to trade at 1,637.25. Trading Deck: What to do if the U.S. gets involved in Syria.

Most Asian markets ended lower and Europe slumped. Wall Street ended lower Monday, giving up earlier gains after Kerry spoke.

Crude-oil futures jumped, with October Brent crude futures surging to a six-month high. The contract jumped $3.38, or 3.1%, to $114.11 a barrel. Syria isn’t much of an oil producer, but fears intervention would deepen tensions that have been on the rise since Egypt’s military coup earlier this summer is likely to keep upward pressure on oil prices, analysts said. See: One-time ‘warning shot” would keep upward pressure on oil prices.

Gold also jumped, with the yellow metal reasserting its traditional safe-haven role to rise back above $1,400 an ounce. That puts gold back in bull-market territory as it continues to claw back heavy losses seen earlier this summer. However, some remained skeptical that gold truly is back.

Emerging markets extended their selloff, with India’s rupee hitting the latest in a string of record lows versus the U.S. dollar as the Turkish lira also dived. Middle East stocks and currencies plunged. The Dubai DFM General Index tumbled 7% on Tuesday, the United Arab Emirates DFM Index XX:DFMGI -7.01% lost more than 6%, and Saudi Arabia’s main stock index dropped close to 2.8%.

Reuters

Syrian activists inspect the bodies of people they say were killed by nerve gas in the Duma neighborhood of Damascus last week.

“Investors were already concerned about instability in emerging markets, so the deteriorating situation was bound to affect risk appetite,” said Gavan Nolan,director of credit research at market-data firm Markit.

The turmoil saw the cost of insuring Turkish government debt through instruments known as credit default swaps, or CDS, jump by $13,000, Markit data showed. It would now cost $245,000 annually to insure $10 million of Turkish government debt against default for five years, the highest level since June 2012.

The price of oil rose sharply, and this will only add to the woes of net oil importers such as Turkey. Countries with current account deficits have borne the brunt of the recent emerging market sell-off – they will no doubt hope that the Syrian conflict doesn’t escalate.

Treasurys were bid higher as traders sought safety, pulling down yields. The yield on the 10-year Treasury note 10_YEAR -2.22% retreated 4 basis points to 2.75%.

The U.S. dollar gained ground versus slumping ermeging-market currencies, but struggled to reassert its safe-haven role as traders instead flocked to the Japanese yen and the Swiss franc.

Meanwhile, the CBOE Volatilty Index VIX +10.34% , or VIX, jumped nearly 10% as U.S. stocks fell across the board. The VIX is often called Wall Street’s “fear index.” The rise put the index at 16.42, a level that still remains well below territory usually taken to signal investors are running scared. Strategists put the historic norm for the index at around 20.