Trade tensions between the United States and Europe drove global market sentiment at the week's open, sparking a sharp flight to safety that battered equities and sent haven assets soaring, with Wall Street inactive for a holiday.

The sell-off was triggered by President Donald Trump's comments on pursuing control of Greenland and his threat to impose tariffs on European nations that oppose the move—reigniting the trade instability that characterized the early phase of his second term.

Across European bourses, major indices fell more than 1%, with the Stoxx 600 on track for its worst daily decline in about two months. The most trade-sensitive sectors led losses, particularly luxury goods and German auto manufacturers.

BMW shares dropped as much as 3.5%, underscoring the exposure of export-driven firms to a potential tariff escalation. U.S. equity futures also traded lower, signaling a weak open when Wall Street resumes trading Tuesday.

“Nervousness is clearly evident,” said Alexandre Baradez, chief market analyst at IG in Paris, noting that mounting uncertainties make it difficult to justify further sustained gains in equities. Sentiment deteriorated further after European officials signaled they would not back down easily and were preparing countermeasures, which could include tariffs on roughly €93 billion of U.S. goods.

George Saravelos, Global Head of FX Research at Deutsche Bank, highlighted that Europe is the largest external creditor to the U.S., holding around $8 trillion in U.S. bonds and equities, and warned that a potential “weaponization of capital” could prove more damaging than tariffs themselves.

Safe-haven demand propelled gold to an all-time high above $4,660 per ounce, with silver also hitting record levels. The rally was further supported by a softer U.S. dollar and rising concerns over Federal Reserve independence, as investors await a Supreme Court ruling related to past tariffs and the authority to remove a Fed board member.

Citigroup analysts raised their outlook, suggesting gold could reach $5,000 in the coming months amid continued central bank and ETF buying.

While European markets weakened, emerging equities held up relatively well. The MSCI Emerging Markets Index traded flat, buoyed by gains of over 1% in South Korea—where Hyundai Motor rose on upbeat analyst notes. Stocks in Taiwan and mainland China also advanced, though Hong Kong fell after data confirmed a slowdown in China’s economy late last year.

“The rotation from growth stocks into commodity-linked equities is supporting emerging markets’ relative performance versus the U.S.,” said Charles Robertson, Chief Macro Strategist at FIM Partners.

Among industrial commodities, copper extended its rally toward $13,000 a tonne, lifted by dollar weakness, supply tightness, and structural demand from AI and clean-energy expansion.

Oil prices edged lower, with Brent crude trading below $64 a barrel as Iran-related geopolitical risks faded and global supply surplus concerns lingered, despite signs of tightening in the spot market.

Cryptocurrencies were swept up in the broad risk-off move, with Bitcoin falling below $92,000 and dragging the sector down by nearly $100 billion in market cap—a pullback analysts attributed more to general defensive positioning than crypto-specific issues.

Washington’s hardening stance toward Europe has revived “Sell America” discussions, though investors remain hesitant to make that call for now.

According to Chris Turner, Global Head of Markets at ING, Trump’s threat follows the “maximum pressure” playbook aimed at securing a deal, rather than marking a permanent breakdown in transatlantic relations. He views it as premature to bet against U.S. assets structurally, noting that past similar episodes have often ended with diplomacy prevailing over rhetoric. Even in a severe escalation scenario, he added, there are few signs of meaningful de-dollarization.

Amid thinner liquidity, Latin American currencies traded mixed. The Colombian peso (COP), Brazilian real (BRL), and Peruvian sol (PEN) gained ground, while the Chilean peso (CLP), Argentine peso (ARS), and Mexican peso (MXN) weakened.

Beyond the Europe-U.S. standoff, market attention this week may turn to monetary policy, with President Trump expected to name his nominee to replace Jerome Powell as Fed Chair.