BERLIN—The euro zone's sovereign debt crisis escalated Friday as the market homed in on Spain as another potential weak spot, leaving officials scrambling to quell investors' fears.

Spanish Prime Minister Jose Luis Rodriguez Zapatero moved to dispel the growing anxiety surrounding the country's fiscal position Friday, saying there was "absolutely" no chance the euro zone's fourth-largest economy would seek a bailout from the European Union. But his attempt to calm the markets had little effect, with the euro tumbling and the selloff in Spanish and Portuguese sovereign bonds continuing.

"If we continue to see the recent trend in Spanish bond yields then the crisis is going to be taken to a completely new level, as Spain accounts for approximately 11.7% of euro-zone [gross domestic product] which is pretty much double the figure of Ireland, Portugal and Greece [combined]," said Gary Jenkins, head of fixed-income research at Evolution Securities.

Sparking Friday's markets turmoil was a report in Friday's Financial Times Deutschland, which quoted unnamed German finance ministry officials as saying an aid package for Portugal would reduce the chances that Spain would also need a bailout.

The Portuguese and Spanish governments, the European Commission and Germany's finance ministry all denied the report, saying pressure wasn't being placed on Portugal to seek help. "It's absolutely, completely false—every reference for an aid plan for this country. It has neither been asked for and neither have we suggested it. It is absolutely false," said European Commission President Jose Manuel Barroso, a former Portuguese prime minister.

But the report still caused the euro to tumble against the dollar to $1.3252 from $1.3355 late in New York Thursday.

The yield premium that investors demand to hold 10-year Portuguese sovereign bonds rather than German bunds rose 0.3 percentage points to 4.35 percentage points, according to Tradeweb, while the spread between Spain's 10-year bonds and bunds spread rose to a fresh euro-era record high of 2.67 percentage points. The spread later recovered to 2.59 percentage points, still 0.07 percentage points higher than Thursday.

The market also wasn't calmed by reports that Ireland's negotiations with the European Union and the International Monetary Fund over the details of the country's €85 billion ($113.52 billion) financial-assistance package appeared to be drawing to a conclusion. A person familiar with the discussions said that EU and IMF officials are pushing to have the deal completed before Monday.

Finance ministers from all 27 EU member states are expected to hold a teleconference on Sunday to discuss the economic situation in Europe, a person in the diplomatic world said.

A report in the Irish Times Friday that senior bondholders in Irish banks could be compelled to pay some of the costs of the bailout led Allied Irish Banks PLC and Bank of Ireland PLC's senior bonds to fall around 0.05 percentage points to trade at around 80% of face value.

On Monday, Irish Finance Minister Brian Lenihan said Ireland would honor its senior bank debt, adding that negotiations with the EU and IMF wouldn't alter this approach. "There's no divergence of opinion between the various international negotiators on this issue of senior debt," he said. "I have not seen any push to have senior debt dishonored or any sense that it's on the agenda."