Indian markets too were somewhat spooked, with the Sensex losing 1.02% or 259.87 points to close at 25,329.14 points, losing ground for third straight session.
The rupee hit 61.74 to the dollar in intra-day trade, the weakest since March 5, but recovered a bit thanks to exporters selling dollars to take advantage of a weaker currency and closed 0.1% higher at 61.1450 to the dollar, according to Bloomberg data.
The MSCI Asia Pacific Index fell 1.4% to 144.09 at 8 pm in Hong Kong, taking its loss this week to 2.5%, Bloomberg reported, adding that European stocks posted the first back-to-back weekly losses since March, sending equity benchmark gauges in France and Germany down more than 10% from their highs.
Experts say markets could see further selling. While markets fell on Friday, the selling was not heavy. Before any recovery takes place, we could see a sharp correction in the markets and would remain wary of buying into this fall, said Andrew Holland, CEO, Ambit Investment Advisory. In the week, foreign institutional investors have bought $431 million worth of shares, taking their year-to-date tally to $12.10 billion.
Apart from the Iraq air strikes, tensions elsewhere added to the worries. Rocket attacks marked the end of a ceasefire between Israel and Hamas, while RIA Novosti reported that Russia offered to mediate between the government in Ukraine and the separatists that it is battling. More than $1.8 trillion has been erased from the value of equities worldwide in the past two weeks.