Updated from 1:35 p.m. EST

As the

stock market rallied amid war threats, investors turned their backs on safe bets such as Treasuries and gold, while the dollar rallied. Oil futures fell.

"The weakness in gold, oil and bonds is in response to the diminishing uncertainty and the understanding that war will be undertaken very soon. Asset classes which served as hedges against the continued uncertainty over war taking place are now trading off, while stocks are bidding up in expectation the conflict will be short and successful," said J. Thomas Madden, vice chairman of investment management at Federated Investors.

The U.S.-led coalition that includes Britain and Spain said Monday that the diplomatic window for disarming Iraq had closed, and President Bush scheduled an evening news conference in which he's expected to tell Saddam Hussein to step down or face invasion. The U.S. also advised U.N. weapons inspectors to get out of the country.

After some early indecision, the news caused a selloff in the benchmark 10-year Treasury note, which was down 1 4/32 to yield 3.83% around 5 p.m. EST. Despite its rock-bottom yield, the 10-year note has been rallying for about a month as uncertainty about war built.

The dollar rallied against foreign currencies, trading at $1.0638 a euro and 118.45 yen at 4 p.m. in New York, up from 118.32. Earlier it touched a two-month high against the Japanese currency.

Despite the potential a war could do damage Iraqi oil fiends, crude oil futures for April delivery fell about 45 cents, or 1.3%, to $34.93 a barrel.

April gold was up about 60 cents to $337.20 an ounce, well off its highs after previously rallying as much as $7 an ounce.

"The markets are sending a message that it's just a matter of what day this week war will begin," said Dennis E. Jarrett, president and chief market analyst at Jarrett Investment Research, who thinks it's risky to be long in oil for the next six months and believes "the Treasuries bubble is close to an end."