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Oil up 0.4%, off early highs, after US strikes Iran

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Wall Street futures up, waiting to see how Iran reacts

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Dollar up on yen, no broad rush to safety as yet

(Adds quote in paragraph 3, updates prices throughout)

By Nell Mackenzie and Wayne Cole

LONDON/SYDNEY, June 23 (Reuters) - World shares slipped

on Monday and oil prices briefly hit five-month highs before

retracing gains as investors awaited possible retaliation from

Iran following U.S. attacks on its nuclear sites, with fallout

risks to global trade and inflation.

Markets remained restrained, with the dollar getting a

modest safe-haven bid and no sign of a rush to bonds. Oil prices

were up just 0.4%, after rising as much as 5.7% overnight.

"If you can keep your head when all about you are losing

theirs, maybe you don't understand the situation," said Paul

Jackson Invesco's global head of asset allocation research.

"Whether a lack of market reaction is naiveté, or a proper

assessment of the situation, time will tell," he said.

European shares fell on Monday with the pan-European STOXX

600 index down 0.2%.

Some market participants hoped Iran might back down, with

its nuclear ambitions curtailed, or even that regime change

might bring a less hostile government to power there.

"That said, any sign of Iranian retaliation or threat to the

Strait of Hormuz could quickly shift sentiment and force markets

to reprice geopolitical risk more aggressively," said Charu

Chanana, chief investment strategist at Saxo.

The Strait of Hormuz is only about 33 km (21 miles) wide at

its narrowest point and around a quarter of global oil trade and

20% of liquefied natural gas supplies pass through it.

Analysts at JPMorgan cautioned that past episodes of regime

change in the region typically resulted in oil prices spiking by

as much as 76% and averaging a 30% rise over time.

Goldman Sachs warned prices could temporarily touch $110 a

barrel should the critical waterway be closed for a month.

For now, Brent and U.S. crude were both up

0.4% at $77.32 and $74.10 a barrel, respectively. Gold also

remained mostly steady at $3,365 an ounce.

RESILIENCE

World share markets looked moderately resilient, with S&P

500 futures and Nasdaq futures both up 0.2%.

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

fell 0.9%, dragged down by shares in Taiwan

which closed 1.42% lower, while Chinese blue chips

closed higher 0.3% and Japan's Nikkei eased 0.1%.

Japan's manufacturing activity data on Monday showed a

return to growth in June after nearly a year of contraction, but

demand conditions remain.

The dollar firmed 1.25% against the yen and was last at

147.885, at its highest since May 15, while the euro

dipped 0.2% to $1.1497. The dollar index firmed

marginally to 99.339.

There was also no sign of a rush to the traditional safety

of Treasuries, with 10-year yields rising about 2

basis points to 4.389%.

Markets are still pricing only a slim chance the Fed will

cut rates at its next meeting on July 30, even after Fed

Governor Christopher Waller broke ranks and argued for a July

easing.

Most other Fed members, including Chair Jerome Powell, have

been more cautious on policy, leading markets to wager a cut is

far more likely in September.

At least 15 Fed officials are speaking this week, and Powell

faces two days of questions from lawmakers, which will likely

cover U.S. tariffs and the attack on Iran's nuclear sites.

Among the economic data due are figures on U.S. core

inflation and weekly jobless claims, along with early readings

on June factory activity from across the globe.