There has been a rout in American high-yield debt over the past month that has pick-up in recent days, with investors pulling a record $7.1bn from US high-yield bond funds in the week ending August 6, according to data compiled by Lipper.
Stock markets, which have come off highs recently amid growing talk of a correction after a five-year bull market, remained wary.
The FTSE 100 closed down for a third day, falling 0.5pc or 30 points to 6,567. German and French also ended the week lower, while Russia's Micex bounced 1.1pc as traders focused on Iraq.
Shares on Wall Street edged higher in the morning, despite a 3pc plunge in Japanese shares and the first US air strikes on Iraq since 2011.
Gold, a traditional safe haven in times of trouble, rose $5.25 to $1,317 an ounce, before slipping back to $1,311 in the afternoon after the Iraq air attacks. The price of benchmark Brent crude also retreated to $105.33 a barrel as worries over the potential risk to supplies eased.
"The geopolitical landscape already looks explosive with tensions rising in Ukraine and with Russia but the appearance of another flash point and the possibility of being drawn into something deeper in Iraq is set to drag sentiment even lower," said Jonathan Sudaria, a dealer at spread-betting firm Capital Spreads.
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