* Nikkei eases, S&P futures down ahead of Nvidia ( NVDA ) results

* Oil prices up on reports of drone attacks in Gulf

* Mounting inflation concerns keep bonds on back foot

By Wayne Cole

SYDNEY, May 18 (Reuters) - Asia share markets slipped on

Monday as fresh drone attacks in the Gulf pushed up oil prices

and bond yields, while the AI boom is set to be tested by

earnings from tech-diva Nvidia ( NVDA ) this week.

A drone strike caused a fire at a nuclear power plant in the

United Arab Emirates, while Saudi Arabia reported intercepting

three drones, as U.S. President Donald Trump warned that Iran

must act "fast" to reach a deal.

Meanwhile, the vital Strait of Hormuz remains closed to all

but a trickle of shipping as Tehran tries to formalise its

control of the waterway that used to carry 20% of the world's

oil trade.

"The closure is draining global oil inventories fast,"

warned analysts at Capital Economics. "Inventories could reach

critical levels by end-June, setting the stage for Brent at

$130-140pb, if not higher."

"If the strait is closed through year-end and oil stays

around $150pb into 2027, that would push inflation to near 10%

in the UK and euro zone, send rates back to their recent peaks

and lead to global recession."

Brent was trading up 1.2% at $110.63 a barrel, while

U.S. crude climbed 1.0% to $106.42 a barrel.

G7 finance ministers gather in Paris on Monday to discuss

the Strait of Hormuz and critical raw material supplies, even as

geopolitical differences threaten to test the group's cohesion.

Concerns energy costs would stay high and thus continue to

drive inflation, saw global bond markets hammered on Friday.

Yields on U.S. 10-year notes were up at

4.584%, having surged 23 basis points last week, while 30-year

bonds stood at 5.109% after jumping 18 basis

points on the week.

Investors in turn feared central banks globally would have

to tighten to head off an inflationary spiral, and a hike from

the Federal Reserve is now seen as a 50-50 chance this year.

Minutes of the Fed's last meeting are out on Wednesday and

should show how much pressure there was on the committee for a

shift to a neutral stance, and away from an easing bias.

Japan's Nikkei eased 0.4%, having fallen 2% last

week though that was from record highs. South Korean stocks

fell 2.1%, as the red-hot market cooled just a little

after demand for semiconductors drove it to all-time peaks.

MSCI's broadest index of Asia-Pacific shares outside Japan

lost 0.6%. China's markets hit their

highest in more than four years last week, but will have to

weather data on April retail sales and industrial output later

in the session.

AI, RETAIL EARNINGS TO TEST THE BULL RUN

S&P 500 futures fell 0.4% and Nasdaq futures

lost 0.5% in early trade.

While Wall Street has been supported by upbeat earnings,

analysts at Citi noted half of the boost to earnings came from

one-time items such as tariff add-backs and asset mark-ups.

Both the gains in profits and the overall indexes were also

tightly based.

"We identify 20 stocks that contributed the majority of

index earnings upside," wrote analyst Scott Chronert in a note.

"Forward guidance increases also show a similar narrow focus."

"Broadening is a necessary condition for meaningful index

upside from here," he added. "This will require a better line of

sight to the Iran conflict wind-down."

The all-important AI trade will be tested by earnings from

Nvidia ( NVDA ) due on Wednesday, where expectations are sky

high for the world's most valuable company.

Nvidia ( NVDA ) shares are up 36% since the March low, while the

Philadelphia SE semiconductor index has surged more than

60%, amid voracious demand for chips as tech companies spend

massively to build AI-related infrastructure.

Also due this week are results from a host of retailers led

by Walmart ( WMT ), which will provide an insight into how

consumers are faring with high energy prices.

In forex markets, risk aversion has tended to benefit the

greenback as the world's most liquid currency. The U.S. is also

a net energy exporter, giving it a relative advantage over

Europe and much of Asia.

The euro sat at $1.1620, after losing 1.4% last

week. The pound wallowed at $1.3318, having dived 2.3%

last week as political instability added to already intense

pressure on the gilt market.

The dollar held firm on the yen at 158.64, with

only the threat of Japanese intervention preventing another

speculative assault on the 160.00 chart barrier.

In commodity markets, gold was flat at $4,540 an ounce

, having drawn little support so far as a safe haven or as

a hedge against inflation risks.