(Updates with early European trading)

* South Korean stocks skid, Europe and Wall St futures

steady

* Brent tops $90 as US launches new strikes, Iran retaliates

* European benchmark gas at highest since March

* Alphabet, Intel ( INTC ) and Tesla among earnings this week

* Yields rise, markets narrow odds on Fed September hike

By Wayne Cole and Alun John

SYDNEY/LONDON, July 20 (Reuters) - The escalating conflict

in the Gulf lifted oil and gas prices on Monday, fanning fears

of inflation, sending bonds lower and leaving stocks on edge as

a packed week of major tech earnings is set to further test the

artificial intelligence trade.

Brent crude climbed above $90 a barrel for the first time in

more than a month as the U.S. military started a ninth straight

day of attacks against Iran, which in turn struck targets across

the region. Just a handful of ships transited the Strait of

Hormuz on Sunday and Tehran claimed to have hit two.

In Europe, the focus was also on gas prices, where the benchmark

hit €60.00 ($68.63) per megawatt hour for the first

time since mid-March.

"The longer the strait remains closed and the war escalates,

the greater the risk that oil prices will have to rise to around

$150/barrel to bring demand down to match the hit to supply,"

said Shane Oliver, head of investment strategy at fund manager

AMP. "This is not our base case but it's a high risk again."

The jump in fuel costs has revived worries about inflation even

after U.S. consumer price data surprised on the downside last

week, leading futures markets to price in at least one Federal

Reserve rate hike by year-end.

That sent U.S. yields higher, with the benchmark 10-year

Treasury yield at 4.55%, while yields on 30-year Treasuries

are back above the psychological 5.0% barrier.

This is a level that tends to attract funds away from

equities and toward fixed income, while lifting the valuation

bar for future corporate earnings.

The shift has come just as investors question sky-high

valuations for chip and AI stocks, which saw the Philadelphia

Semiconductor Index shed 10% last week to leave it 20% down from

June's record high.

Money markets see more tightening from the European Central

Bank, which they see as likely to raise rates again in September

and are pricing an 80% chance of a further move by year-end.

That sent the policy-sensitive German 2-year yield as high as

2.817% on Monday, its highest in two years.

SKY HIGH EARNINGS EXPECTATIONS

Those higher energy prices and yields kept equity markets in

check on Monday, with Europe's broad index flat, as a

1% gain in energy stocks balanced losses elsewhere.

U.S. futures were a whisker higher though MSCI's broadest index

of Asia-Pacific shares outside Japan dipped

0.3%, as South Korea's chip-heavy market lost a further

4.1%.

It dived almost 9% last week in wild trade as retail investors

were squeezed out of leveraged positions.

Chip investors are also still digesting Friday's news from

Chinese AI firm Moonshot,which said it had a new open-weight

model, Kimi K3, that delivers performance approaching U.S. giant

Anthropic's frontier Fable model.

All of which raises the stakes for this week's rush of quarterly

results, which include Alphabet, Intel ( INTC ) and

Tesla.

BofA analyst Savita Subramanian remains upbeat on the

earnings outlook, tipping a 5% beat versus consensus, or 28%

growth. Tech is expected to drive over half of growth, with

semiconductors expected to rise around 130% year-on-year.

The excitement in currency markets was with sterling, as Andy

Burnham is set to become Britain's seventh prime minister in a

decade.

The pound rose 0.17% on the dollar to $1.3475 and was also

firmer on the euro at 84.91 pence to the common currency,

continuing its recent gains, as the swift and relatively

drama-free leadership transition causes traders to unwind some

short positions.

British gilts were slightly underperforming European peers.

Other currencies were muted with the euro steady at $1.1442 and

the Japanese yen also flat at 162.36 per dollar.