* Trump tells aides he is willing to end Iran war without

reopening Hormuz - WSJ

* U.S., European futures turn higher; Asia shares still

struggle

* Brent crude set for record monthly rise

By Rae Wee

SINGAPORE, March 31 (Reuters) - Oil prices on Tuesday

were set for a record monthly rise while Asian shares were

headed for their steepest fall since 2022, capping a tumultuous

month as the war in the Middle East stoked fears of higher

inflation and slower growth.

Bonds were headed for their largest decline in months, owing

to the hawkish sea change in the global outlook for interest

rates, while the dollar recorded its strongest gain in eight

months.

A month into the war, investors continue to be whipsawed by

a barrage of headlines as tensions and attacks between the U.S.,

Israel and Iran escalate.

"It appears markets have gone from just mechanically trading

headlines ... into a little bit more of a fear mode, taking risk

off the table," said Vishnu Varathan, Mizuho's head of macro

research for Asia ex-Japan.

"That partly might have to do with the transition from

earlier thinking that there's a good chance of Trump being able

to control the timeline and/or your TACO trade, to now beginning

to be concerned or fearing a more prolonged conflict."

Markets turned a little more upbeat after The Wall Street

Journal reported that U.S. President Donald Trump told aides he

is willing to end the military campaign against Iran even if the

Strait of Hormuz remains largely closed.

U.S. futures reversed early losses, with Nasdaq futures

up 0.34% and S&P 500 futures gaining 0.4%.

EUROSTOXX 50 futures rose 0.15% and DAX futures

were up 0.26%.

Still, Brent crude futures were up roughly 2% at

$114.98 per barrel, taking their gains for the month to roughly

59%, the largest on record.

U.S. crude advanced 1.8% to $104.73 a barrel and was

headed for a monthly rise of roughly 56%, the most in nearly six

years.

"I think inflation will be the bigger near-term concern for

global markets," said Thomas Mathews, head of markets for

Asia-Pacific at Capital Economics.

"But if oil prices don't fall back over the next few months,

we will probably have to start thinking about growth too."

The higher-for-longer energy prices have meant more pain for

Asia, which is highly reliant on energy from the Middle East.

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

was down 0.55% and on track for a monthly fall

of more than 12%, the most substantial decline since September

2022.

Japan's Nikkei was down 0.93% and was set to lose

12.6% this month, while South Korea's Kospi was headed

for a monthly decline of more than 17%, the most since 2008.

BONDS UNDER WATER, DOLLAR IS KING

The threat of inflation has led investors to ramp up

expectations for rate hikes across major central banks this

year, which in turn hammered bonds.

The Federal Reserve is now expected to keep rates on hold

this year, compared with more than 50 basis points

worth of easing priced in prior to the start of the war.

Fed Chair Jerome Powell on Monday said the U.S. central bank

can wait to see how the Iran war affects the economy and

inflation, noting that policymakers typically look through

shocks such as those from higher oil prices.

U.S. Treasury yields steadied on Tuesday, though the

two-year yield was set to rise more than 40 bps for

the month, its largest increase since October 2024.

The benchmark 10-year yield has similarly

advanced about 37 bps in March, its largest monthly rise since

December 2024.

In currencies, the dollar was headed for its biggest monthly

gain since July, having emerged as one of the few safe-haven

assets amid the war.

Against a basket of currencies, the greenback was set

to rise roughly 2.9% this month. The euro, which last

bought $1.1474, was headed for a nearly 3% monthly loss while

sterling was down more than 2% in March.

The yen remained a whisker away from a 160 per dollar

level and was last 0.1% weaker at 159.93.

In precious metals, spot gold was up 0.6% at

$4,538.07 an ounce.