Hong Kong CNN Business  — 

Global markets fell on Tuesday as investors feared US House Speaker Nancy Pelosi’s visit to Taiwan could severely escalate tensions with China.

US and European equities followed Asian indexes down as investors weighed the market implications of the trip.

  • Hong Kong’s Hang Seng Index fell 2.4%, and mainland China’s Shanghai Composite Index ended down 2.3%.
  • Germany’s DAX and France’s CAC 40 dropped 0.3% and 0.4%, respectively, while the FTSE 100 in London was flat.
  • All three major US stock indexes opened in the red.
  • The Japanese yen, a traditional safe-haven currency, surged 0.6% against the US dollar.

Pelosi touched down in Taipei on Tuesday night local time, becoming the first House speaker in 25 years to visit the island. Her trip comes at a low point in US-China relations and despite warnings from the Biden administration against a stop in Taiwan.

Prior to her arrival, Beijing warned of the “egregious political impact” of her visit to Taiwan, which China claims as a part of its territory. A foreign ministry spokesman said that China’s military “won’t sit by idly” if Beijing feels its “sovereignty and territorial integrity” is being threatened.

“Pelosi’s Taiwan visit is tainting sentiment today,” Stephen Innes, managing partner at SPI Asset Management, said Tuesday. “And amid escalating tensions in Taiwan Strait and deepening worries about a global economic slowdown, investors are diving headlong into US bonds.”

“No party wants a real war, but the risk of mishap or even aggressive war game escalation is real, which could always lead to a tactical mistake,” he said.

Pelosi and the congressional delegation that accompanied her said in a statement Tuesday that the visit “honors America’s unwavering commitment to supporting Taiwan’s vibrant democracy.”

Analysts said they expected to see further weakness in the Chinese yuan and Taiwan dollar in the coming days.

CNN’s Eric Cheung, Kylie Atwood, Alex Rogers and Kevin Liptak contributed to this report.