Tremors from the shock request by Dubai’s flagship government-owned holding company for a debt standstill spread through global equity markets on Friday, triggering a sell-off in Asia and heavy losses on Wall Street.

While European markets staged a modest but nervous rally after heavy sell-offs this week, investor sentiment remained jittery amid a scramble to assess the broader fallout of the problems of Dubai World.

“There is still nervousness,” said Chris Furness, strategist at 4Cast consultancy. “This has made people recognise the risk of a systemic global ripple.”

Market watchers said the investor fears had been heightened by continuing lack of hard information coming out of the Gulf over the warning by Dubai World that it intends to request to delay payments for six months on its debts.

“Right now, none of us know where the story might go over the next week,” said Steven Major, global head of fixed income strategy at HSBC.

Amid concerns that markets in the Gulf will be hammered when they reopen on Monday – and that pressure will mount on banks with exposure to Dubai – investors are looking to Abu Dhabi, the main financial powerhouse in the United Arab Emirates federation, to calm nerves. The crisis has undermined the assumption that Abu Dhabi and the federation would bail out Dubai. So far there has been no statement from the federal government or Abu Dhabi.

A rally in the stocks of European banks exposed to Dubai helped the FTSE Eurofirst 300 index recover 1.2 per cent. However, Tokyo suffered a 3.2 per cent fall, its biggest one-day decline in almost eight months.

US markets, closed Thursday for Thanksgiving, sold off heavily in a shortened trading session. The S&P 500 index closed 1.72 per cent down 1,094.33.

HSBC has the biggest loan exposure to the UAE, according to the Emirates Banks Association, with outstanding loans at the end of last year of $17bn (€11.4bn). The second biggest lender was Standard Chartered, with $7.8bn. However, analysts at Goldman Sachs said that, although no specific figures were available for lending to Dubai or Dubai World their “worst-case loss estimate” for HSBC was $511m, and for StanChart $177m.

Additional reporting by Sam Jones