* Investors look for safety amid Saudi tensions; yen higher
* Analysts say investors cautious but far from panicked
* Euro rebounds vs dollar despite Merkel’s allies’ election loss
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh (Adds quotes, details, updates prices)
By Tommy Wilkes
LONDON, Oct 15 (Reuters) - The yen hit a one-month high and the Swiss franc rallied on Monday as rising geopolitical tension and further falls in equity markets left investors skittish at the start of the week.
European stocks sunk to 22-month lows amid rising tensions between Saudi Arabia and the West after the monarchy warned against trying to punish it for the disappearance of a journalist critical of its regime.
That added to a number of concerns for markets globally, including rising oil prices, the ongoing Sino-U.S. trade dispute and a humbling election defeat for Chancellor Angela Merkel’s conservative Bavarian allies .
Merkel’s allies suffered their worst election result since 1950 on Sunday, in a setback that raised tensions within the country’s crisis-prone national government.
The euro, however, was little fazed. It rose 0.3 percent to $1.1592 against the dollar as the greenback sold off against a basket of currencies.
Analysts said the euro’s fortunes over the next few days would be determined in part by the Italian government’s annual budget, which the cabinet is due to approve later on Monday .
“I don’t think it’s (the German election result) a huge political risk, but it does tell you that political risks in Europe are not going away,” said Alvin Tan, a currencies analyst at Societe Generale.
The yen rose as much as half a percent to 111.62, its strongest since Sept. 13. The Swiss franc, which investors also tend to buy when markets are in flux, rose 0.4 percent against the euro to 1.1423 francs and 0.6 percent versus the dollar to 0.9853 francs.
Valentin Marinov, head of currency strategy at Credit Agricole, said a “constellation of political risks” was weighing on sentiment and supporting yen and franc buying.
However, he said the moves were limited and did not suggest a “game changer” for currency markets, which have remained relatively calm amid recent equity market sell-offs.
The Australian dollar, often seen as a barometer of global risk sentiment, shrugged off the mood and rose 0.3 percent to $0.7141 against the dollar, suggesting investors were far from panicked. The Aussie had hit a two-year low of 0.7039 on Oct. 5.
There were also some signs stock markets were calming in European trading.
“While the losses being reported are more modest than those seen last week, which investors will hope represents some stability and normality returning to markets, it will remain a source of concern for now,” said Craig Erlam, market analyst at currency broker OANDA.
Sterling dropped 0.2 percent $1.3121 after Brexit talks hit an impasse, before recovering to trade up at $1.3178, propelled higher by the dollar’s weakness.
The pound fell 0.3 percent against the euro to 88.170 pence . (Editing by Larry King)