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Escalating tensions in Ukraine roil global markets

Pan Pylas, AP Business Writer

Barricades in front of local government building with banner which reeds: 'Crimea Russia" in Simferopol, Crimea, Ukraine, Thursday, Feb. 27, 2014. Ukraine put its police on high alert after dozens of armed pro-Russia men stormed and seized local government buildings in Ukraine's Crimea region early Thursday and raised a Russian flag over a barricade. (AP Photo/Darko Vojinovic)

LONDON (AP) -- An escalation in tensions in the Ukrainian region of Crimea roiled global markets on Thursday.

As reports emerged that dozens of heavily armed pro-Russia gunmen have seized control of local government buildings in Crimea, stocks in Europe — and not just in Moscow and Kiev — took a pounding while the dollar and gold advanced. Investors are worried that the tensions in the strategically important peninsula may take the Ukrainian crisis into a new, more dangerous phase.

While Russia has raised questions over the legitimacy of the new Ukrainian authorities after President Viktor Yanukovych fled Kiev last week and has initiated surprise military drills, Ukraine has put its domestic security forces on high alert and urged Russian forces not to leave their base in southern Crimea.

Over the past couple of weeks, investors monitored developments in Ukraine with a degree of nonchalance. Now they are worrying that Russia may be drawn in. Geopolitical worries tend to prompt investors to search out the sanctuary of safe haven assets such as gold and the dollar.

"The perceived risk of military intervention by Russia has heightened," said Lee Hardman, an analyst at Bank of Tokyo-Mitsubishi UFJ.

In Europe, the main stock indexes, which had started the session flat, were trading sharply lower. Germany's DAX was down 1.5 percent at 9,518, while Britain's FTSE 100 fell 0.6 percent at 6,758. The CAC-40 in France was 0.7 percent lower at 4,368.

Unsurprisingly, markets in Ukraine and Russia were feeling the heat. Russia's RTS stock index was down 2.1 percent while the Ukrainian currency, the hryvnia, briefly touched another record low against the dollar, at 11.25 per dollar

"The Ukrainian hryvnia is off another 10 percent today, as the country is in desperate need of an aid package," said Benjamin Reitzes, an analyst at BMO Capital Markets.

Wall Street was poised for a lower opening, too, with both Dow futures and the broader S&P futures down 0.3 percent.

In other markets, the price of an ounce of gold has risen 0.3 percent to $1,333 while the euro has fallen 0.2 percent to $1.3658.

While keeping an eye on developments in Ukraine, investors will also be monitoring comments later from the Federal Reserve chair Janet Yellen to the Senate's Banking Committee. Stocks jumped on Feb. 11 when Yellen reassured Congress over the central bank's market-friendly, low-interest rate policies.

Earlier in Asia, shares were mixed with most of the news reports over Crimea coming after the close.

Hong Kong's Hang Seng gained 1.7 percent to 22,828.18 and Seoul's Kospi added 0.4 percent to 1,978.43. Markets in Southeast Asia were also mostly higher and China's Shanghai Composite added 0.3 percent to 2,047.35. Japan's Nikkei 225 stock index edged 0.3 percent lower to 14,923.11.