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* STOXX 600 rises on day, set for worst month since 2022

* Euro zone inflation rises on oil shock, data shows

* Government bond yields steady

By Elizabeth Howcroft

PARIS, March 31 (Reuters) - European shares rose on

Tuesday but were still on track for their worst month since

2022, while oil prices were set for a record monthly increase,

as traders came to the end of a tumultuous March dominated by

the Iran war.

Iran attacked a fully-loaded oil tanker off Dubai early on

Tuesday after President Donald Trump warned the United States

would obliterate Iran's energy plants and oil wells if it does

not open the Strait of Hormuz. Still, markets got a lift from a

Wall Street Journal report that Trump had told aides he is

willing to end the military campaign even if the strait remains

largely closed.

The war, which began with the U.S. and Israel launching

coordinated strikes against Iran on February 28, has sent

shockwaves across global markets and raised the risk of a

worldwide recession.

At 1119 GMT, Europe's STOXX 600 was up 1% on the day,

as was the FTSE 100. But the STOXX 600 remained on track

for its steepest monthly loss since June 2022, a break from its

previous eight months in a row of gains.

U.S. stock futures also rose, with S&P 500 and Nasdaq

e-minis both up around 1% on the day .

Equity markets are "taking the U.S. administration at their

word, that they're going to end the war," said Colin Graham,

head of multi-asset strategies at Dutch asset manager Robeco.

"They haven't moved to day-two where the Strait of Hormuz

could still be closed."

As prices were moved by contradictory reports about the U.S.

plans, interpreting Tuesday's moves was complicated by it being

the last day of the month and quarter, when large asset managers

typically rebalance their portfolios back to their target

allocations.

INFLATION AND GROWTH FEARS

Brent crude futures were up 2.4% on the day at $115.50 a barrel

, on track for their biggest monthly gain on record, and

U.S. West Texas Intermediate futures were up 1.4% at $104.34

.

Oil prices have surged as a result of the war, due to Iran's

effective closure of the Strait of Hormuz, which carries about a

fifth of the world's oil supply. The average U.S. retail price

of gasoline hit $4 a gallon on Monday.

The oil shock meant euro zone inflation soared past the European

Central Bank's 2% target in March, data showed.

Euro zone government bond yields were steady, with the

German 10-year yield at 3.0292%.

Government bond yields had retreated from multi-year highs on

Monday after rising sharply this month because of the conflict,

with investors appearing to refocus on the risk of weaker growth

stemming from the energy shock.

The European Union's energy chief has told governments to

prepare for "prolonged disruption" to energy markets as a result

of the war, ahead of an emergency meeting on Tuesday.

"If the Strait of Hormuz remains closed for the next week or

two, then I think we'll be raising our probabilities of

recession in our scenario analysis," Robeco's Graham said,

adding that this was not yet the case.

Developed market currencies were broadly steady, but the

dollar was still on track for its biggest monthly gain since

July, having held up as a safe-haven currency. The euro

was up 0.1% at $1.1474, still on track for its worst month since

July.

Japan's finance minister said that the government was ready to

respond "on all fronts" against foreign exchange volatility,

underscoring Tokyo's alarm over the yen's recent slide.

Gold was up 1.5%, at $4,578.67, on track for its biggest

monthly drop since 2008. Goldman Sachs said it continued to

expect gold prices will reach $5,400 per troy ounce by end-2026.

(Reporting by Elizabeth Howcroft

Editing by Keith Weir and Chizu Nomiyama )