Concerns of an attack have swelled this week following claims that President Bashar Assad's government was responsible for an alleged chemical attack on civilians outside Damascus on Aug. 21. Assad denies the charge.
On Wednesday, Britain said it would put forward a resolution to the U.N. Security Council condemning the Syrian government. A statement from Prime Minister David Cameron's office said Britain would seek a measure "authorizing necessary measures to protect civilians" in Syria. Military force is one of the options that can be authorized under Chapter 7 of the U.N. charter.
Investors have responded to the prospect of a military strike and uncertainty in the Middle East by punishing supposedly risky assets such as stocks in favor of traditional safer investments like gold.
"Intervention in Syria could well turn out to be a 'Pandora's box', with ramifications which are difficult to envisage at this stage," said Chris Beauchamp, market analyst at IG.
In Europe, the FTSE 100 index of leading British shares was down 0.4 percent 6,418 while Germany's DAX fell 1.1 percent to 8,155. The CAC-40 in France was 0.3 percent lower at 3,956.
The main Wall Street indexes were poised for a fairly steady opening following Tuesday's broad sell off.
Though stocks have taken a bit of a pounding this week, other assets have posted big gains, notably the price of oil.
"While Syria isn't a big producer of oil, the potential for the conflict to escalate in the Middle East is likely to continue to push prices higher, unless we see attempts from the U.S. to ease concerns about some form of military action," said Craig Erlam, market analyst at Alpari.
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The benchmark New York rate was trading 96 cents higher to $109.96 a barrel, having earlier risen to a high of $112.24, its highest level since May 2011. On Tuesday, the oil price jumped $3.09 to $109.01 a barrel, its highest closing price since February 2012. Despite the recent gains, the oil price remains far below its record close of $145.29 a barrel, reached on July 3, 2008.
Gold has also been in demand through its status as a haven in times of geopolitical uncertainty. The yellow metal was trading another $3.40 higher at $1,423 an ounce. Earlier, it had hit a three-month high of $1,434.
The prospect of a strike on Syria has been felt far and wide across financial markets as investors searched out safer places for their money.
India's rupee, for example, fell to a new low against the U.S. dollar. One dollar now buys about 68.4 rupees compared with 66.2 rupees only a day earlier. The stock benchmark in the Philippines shed 3 percent.
Elsewhere in Asia, Japan's Nikkei 225 index sank 1.5 percent to close at 13,338.46, its lowest finish in two months, while Hong Kong's Hang Seng dropped 1.6 percent to 21,524.65. Australia's S&P/ASX 200 slid 1.1 percent to 5,087.20.
Aside from emerging market currencies, such as the Indian rupee, trading in the foreign exchange markets was a little bit more settled. The euro was down 0.3 percent at $1.3347 while the dollar rose the same rate to 97.40 yen.
Press; By PAN PYLAS and PAMELA SAMPSON]
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