(Updates to afternoon New York time)

* Oil prices jump after Iran attacks UAE port, hits South

Korean vessel in Hormuz

* Central banks turn hawkish as oil-driven inflation

complicates rate outlook

* Yen volatility unsettles forex markets, analysts cite

possible Japanese intervention

By Karen Brettell and Nell Mackenzie

May 4 (Reuters) - Oil prices jumped about 5% on Monday

and stocks fell as Iran escalated its military campaign,

striking a UAE oil port with drones and hitting a South Korean

vessel in the Strait of Hormuz.

Brent futures rose $6.43, or 5.9%, to $114.60,

while U.S. West Texas Intermediate (WTI) crude rose 4% to

$105.91.

The moves came after U.S. President Donald Trump pledged over

the weekend that the U.S. Navy would force the strait open.

The Strait of Hormuz, through which roughly a fifth of the

world's seaborne oil and gas normally flows, has been severely

disrupted for two months. Monday's attacks reinforced fears that

any military effort to reopen it could trigger a broader

confrontation.

U.S. stocks fell broadly, with the Dow Jones Industrial

Average down 1.03%, the S&P 500 0.53% lower, and

the Nasdaq Composite off 0.41%.

"The longer oil prices stay elevated above $100 a barrel,

the more the fiscal stimulus from the tax cuts passed in 2025

shifts from being a stimulus to acting as a shock absorber,"

said Brock Weimer, analyst, investment strategy, at Edward

Jones.

MSCI's broadest index of global shares outside Japan

also fell, reversing earlier gains after

tech-heavy South Korean stocks closed over 5% higher.

In Europe, German carmakers dragged on regional equities after

Trump said on Friday he would raise tariffs on European cars and

trucks.

The pan-European STOXX 600 index fell 0.99%.

Germany's 10-year bond yield, the benchmark for the

euro zone bloc, rose 5 basis points to 3.08%. Bond yields move

inversely to prices. Markets in London were closed for a public

holiday.

CENTRAL BANKS TURN HAWKISH AS OIL FANS INFLATION FEARS

The oil-driven inflation threat pushed bond yields higher

and complicated the outlook for monetary policy globally.

Markets no longer expect the Federal Reserve to cut rates

this year, and have begun pricing in hikes from both the

European Central Bank and the Bank of England.

Barclays on Monday joined other brokerages in forecasting the

Fed will not ease policy this year. Friday's April payrolls

report could further shift expectations.

The yield on benchmark U.S. 10-year notes

rose 7.6 basis points to 4.454%.

YEN VOLATILITY KEEPS FOREX TRADERS ON EDGE

Currency markets were also unsettled, with traders closely

watching for signs of Japanese intervention to support the yen.

The dollar fell sharply against the yen in Asian trading

before reversing direction. The Japanese yen was last

down 0.11% against the greenback at 157.25 per dollar.

Analysts believe Tokyo may have already intervened last week to

the tune of around $35 billion.

"The case for intervention is strong, given the inflationary

impact of a weaker yen via import prices, a U.S. administration

broadly comfortable with such action, and Japan's ample FX

reserves," said Roberto Cobo Garcia, head of G10 FX strategy at

BBVA.

The euro fell 0.3% to $1.1685 while sterling

weakened 0.34% to $1.3526.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

rose 0.35% to 98.50.

In commodity markets, spot gold fell 2.22% to

$4,511.36 an ounce.