SINGAPORE, Oct 8 (Reuters) - Global stocks began Tuesday

on a cautious note while oil prices stayed elevated as the

escalating conflict in the Middle East sapped risk appetite

ahead of China's highly anticipated reopening after a long

holiday.

The benchmark 10-year U.S. Treasury yield held

above 4% in early Asia trade, as a robust U.S. labour market

prompted traders to heavily scale back their expectations for

Federal Reserve rate cuts.

Hezbollah on Monday fired rockets at Israel's third-largest

city, Haifa, and Israel looked poised to expand its offensive

into Lebanon, one year after the devastating Hamas attack on

Israel that sparked the Gaza war.

Heightened fears of a widespread conflict and disruptions to

supply sent Brent crude futures surging above $80 a

barrel for the first time in over a month in the previous

session.

It was last 0.09% higher at $81.00 per barrel, while U.S.

crude futures rose 0.14% to $77.25 a barrel.

"The global benchmark hit USD80/bbl as expectations grow

that Israel will target Iran's oil infrastructure in retaliation

for a missile attack last week. President Biden's comments

didn't allay these fears," said analysts at ANZ in a note.

"We still think a direct attack on Iran's oil facilities is

the least likely of Israel's retaliation options."

Still, the dour mood kept stocks on tenterhooks on Tuesday.

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

fell 0.05%, while Tokyo's Nikkei opened

0.79% lower.

S&P 500 futures tacked on 0.03% while Nasdaq futures

lost 0.01%.

But the cautious moves in stocks could change once Chinese

markets reopen after a week-long holiday later in the day. Gains

and volatility could be on the cards, given Singapore-traded

FTSE China A50 futures have rallied some 14% since

China's cash markets closed on Sept. 30.

Hong Kong's Hang Seng China Enterprises index was up

11% over the same period, pointing to a catch-up rally for the

mainland.

Before the break, China announced its most aggressive

stimulus measures since the pandemic, in a move which sent the

CSI300 soaring 25% over five sessions and sparked a

rally across global share markets.

Focus will also be on a press conference from the country's

National Development and Reform Commission due at 0200 GMT, for

further details around the stimulus pledges that drove the

market frenzy.

"Whether the outcome meets any expectations will determine

if the Hong Kong market can go up further," said Richard Tang,

China strategist and Hong Kong head of research at Julius Baer.

"Foreign investors had taken up their positions last week,

driving a strong rally. The second leg of the rally will likely

be driven by mainland Chinese purchases."

FED BETS

In the broader market, investors were also considering the

future path of the Fed's easing cycle in the wake of Friday's

blockbuster U.S. jobs report.

Any chance of another outsized 50-basis-point rate cut next

month has since been erased and traders are even pricing in a

14.6% chance that the Fed could keep rates on hold. Just 50 bps

worth of cuts are priced in by December.

Reflecting the less aggressive Fed easing expectations, the

two-year U.S. Treasury yield hovered near its highest

level in over a month on Tuesday and last stood at 3.9764%.

"While confidence about another 50bp cut is justifiably

dampened... the Fed rate cut cycle is far from derailed," said

Vishnu Varathan, head of macro research for Asia ex-Japan at

Mizuho Bank.

"Admittedly, the all-around blockbuster jobs report is

justifiable cause to reassess overzealous 'pivot bets' on

front-loaded, outsized cuts."

Still, the U.S. dollar failed to get a further lift on the

revised Fed expectations, having already had a strong run last

week also owing to safe-haven gains linked to the Middle East

conflict.

It was on the back foot in early Asia trade, falling 0.17%

against the Japanese yen to 147.97, while sterling

rose 0.03% to $1.3089.

Against a basket of currencies, the greenback eased 0.02% to

102.44, though it hovered near a seven-week high hit on Friday.

Elsewhere, spot gold was little changed at $2,643.33

an ounce.