Instability in Europe  and the fall in the value of the Euro are creating ever growing concerns in global financial markets.

There are increasing fears that Europe could even face a full-blown financial crisis, which in turn may potentially damage the economy in the United States. Such concerns are encouraging some investors to abandon risky bets in the financial markets and rush for safety instead.

After gaining momentum in recent weeks, this shift is buffeting not only the world’s stock markets but also the credit markets, where the strains seem to be rising almost by the day. However, the worry is that the credit markets, which are where the American financial crisis began and which are now the focus of Europe’s problems, are entering a dangerous new period. The cost of credit is already rising in the interbank markets, where banks borrow money to finance themselves from day to day.

The global charge for safety was apparent in the financial markets on Tuesday, when the Dow Jones industrial average tumbled below 10,000 before staging an afternoon rally. While share prices recovered by the close, leaving major indexes near to where they started the day, traders pointed to the potential danger signals flashing in the markets for bonds and currencies.

The credit markets have not frozen as they did in 2008 after the collapse of Lehman Brothers. But the flight to safety is nonetheless creating sharp divisions among companies, and entire countries, that are perceived as risky and those that are considered relatively safe.

Investors have rushed to buy dollars and yen, traditional havens in financial storms, and sell the beleaguered euro. This in turn drove up prices of German government bonds, sending the yields on those investments, which move in the opposite direction of their prices, to their lowest levels since 1990.

Europe’s problems are rapidly shifting from Greece to Spain, one of the world’s largest economies. The decision by Spanish authorities to seize a savings bank over the weekend and then encourage the merger of four other troubled banks has raised questions about the health of Spain’s broader banking system.

While banks in the United States have relatively little exposure to their Greek counterparts, Spanish banks owe American financial institutions about 197.7 billion U.S. dollars, according to the Bank for International Settlements. Marc Chandler, global head of currency strategy at Brown Brothers Harriman, says that Spanish borrowers in both the government and private sectors owe foreign investors about 1.1 trillion dollars. In comparison, Greece’s external debt is closer to 236 billion dollars, Chandler estimates.

In credit markets, the worries over Spain has helped push up the three-month London interbank offered rate, the interest rate at which banks are willing to lend money to each other, for the 11th consecutive day on Tuesday, to 0.536 percent, the highest rate since July 2009 and about double the rate at the beginning of this year.

Such a rise is generally seen as a sign of stress in the banking system, and according to the futures market, the rate could double again by December, helped higher by positive growth in the United States.

Since April, as nervousness over Europe has grown, the flight to safety has played out in markets around the world. Investors have sold emerging market bonds and relatively risky currencies like the Australian dollar. Many instead piled into Treasuries. “The bottom line is risk aversion has gone up,” said Adrian Cronje, chief investment officer of Balentine.

In the United States, the Dow Jones industrial average which had gone as low as 9,774.48, closed down 0.2 percent at 10,043.75. The Standard & Poor’s 500-stock index closed up 0.04 percent at 1,074.03.

The impact of all this on the U.S. economy is still an open question. Convulsions in Europe could have an effect on the economy by making borrowing more costly. Sharp appreciation of the dollar against the euro and a feared slowdown in European growth could hurt American exports.  Bernanke is scheduled to speak Wednesday in Tokyo at a conference sponsored by the Bank of Japan where his comments will be listened to with interest.

While investors are running to safety and displaying signs of pessimism, some have aired a little more optimism. In London, James Bullard, president of the Federal Reserve Bank of St. Louis, said he did not think the financial turmoil in Europe was likely to set off another global economic downturn.

“The U.S. may actually be an unwitting beneficiary of the crisis in Europe, much as it was during the Asian currency crisis of the late 1990s,” Bullard said. “This is because of the flight to safety effect that pushes yields lower in the U.S. Of course the U.S. also has its own fiscal problems that must be directly addressed in a timely manner if the nation is to maintain credibility in international financial markets.”