(Updates at 0900 GMT)

By Iain Withers

LONDON, Oct 3 (Reuters) - Global stocks dipped as

European and Asian share indexes broadly retreated on Thursday,

while oil prices rose further as markets weighed the risk of a

widening Middle East conflict.

Euro zone stocks were last down 0.8%, as investors

digested weak business activity survey data from the bloc, while

MSCI's all-country index also slipped 0.2%.

Asia-Pacific shares outside Japan had

earlier shed 1%, largely driven by Hong Kong stocks

sagging after a sizzling rally, while several markets, including

mainland China and South Korea, were closed for the day.

Japan's Nikkei bucked the trend, up 2% after the

country's newly elected prime minister Shigeru Ishiba said it

was not the time to raise rates after meeting the central bank

governor Kazuo Ueda. Bank of Japan board member Asahi Noguchi

later said rates would increase cautiously and slowly.

Nasdaq futures dropped 0.5% and S&P futures

slipped 0.4%.

Geopolitical tensions loomed large, after Israel bombed

Beirut early on Thursday, following a year of clashes with

Iran-backed Hezbollah.

Oil prices gained on Thursday as concerns grew that the

conflict could disrupt crude oil flows from the key exporting

region, overshadowing a stronger global supply outlook.

Brent and U.S. crude futures gained around $1 each and were

up at $71.11 and $74.83 respectively.

"Oil's had a good week. But in context, you're looking at

kind of low 70s versus summer levels in the 80s. So I don't

think there's a signal from the market to say, brace yourself

for major escalation... But it's a volatile situation," said

Eren Osman, managing director of wealth management at Arbuthnot

Latham.

SAFE HAVEN FLOWS MUTED

Safe haven flows in the wider market have so far been muted.

Spot gold dipped 0.5% on the day to $2,644.99, but remained near

a record high.

Treasury yields rose on Wednesday after a strong private

payrolls report added to evidence of a healthy U.S labour

market, lessening the risk of a big downside miss for Friday's

non-farm payrolls data.

Two-year Treasury yields were little changed on

Thursday at 3.6539%, while 10-year yields were at

3.8056%.

Markets imply a 35% chance the Fed will cut interest rates

by another 50 basis points in November, compared with almost 60%

last week, and have around 70 basis points of easing priced in

by year-end.

In currencies, the euro was broadly flat at $1.1038, and not

far from Wednesday's low of $1.10325, a level last seen on Sept.

12, while the US dollar index gained 0.2% to 101.88.

Sterling fell 1.1% to $1.3115 after Bank of England

Governor Andrew Bailey told the Guardian newspaper that the

central bank could become a "bit more aggressive" on rate cuts

if inflation continued to ease.