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Asian stock markets: https://tmsnrt.rs/2zpUAr4

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Oil up 1.5%, but off early highs, after US strikes Iran

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Wall Street futures dip, waiting to see how Iran reacts

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

(Updates prices to Asia afternoon)

By Wayne Cole

SYDNEY, June 23 (Reuters) - Major share indexes slipped

in Asia on Monday and oil prices briefly hit five-month highs as

investors anxiously waited to see if Iran would retaliate

against U.S. attacks on its nuclear sites, with resulting risks

to global activity and inflation.

Most of the market moves were restrained, with the dollar

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

Oil prices were up around 1.5%, but well off their initial

peaks.

Optimists were hoping Iran might back down now that its

nuclear ambitions had been curtailed, or even that regime change

might bring a less hostile government to power there.

"Markets may be responding not to the escalation itself, but

to the perception that it could reduce longer-term uncertainty,"

said Charu Chanana, chief investment strategist at Saxo.

"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."

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

its narrowest point and sees around a quarter of global oil

trade and 20% of liquefied natural gas supplies.

Analysts at JPMorgan also 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.

"Selective disruptions that scare off oil tankers make more

sense than closing the Strait of Hormuz given Iran's oil exports

would be shut down too," said Vivek Dhar, a commodities analyst

at Commonwealth Bank of Australia.

"In a scenario where Iran selectively disrupts shipping

through the Strait of Hormuz, we see Brent oil reaching at least

$100/bbl."

Goldman Sachs warned prices could temporarily touch $110 a

barrel should the critical waterway be closed for a month.

For now, Brent was up a relatively mild 1.4% at

$78.07 a barrel, while U.S. crude rose 1.4% to $74.88.

Elsewhere in commodity markets, gold edged down 0.3% to $3,357

an ounce.

KEEP CALM AND CARRY ON

World share markets were proving resilient so far, with S&P

500 futures off just 0.1% and Nasdaq futures down

0.2%.

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

fell 1.0%, while Chinese blue chips

dipped 0.2%. Japan's Nikkei eased 0.2%, though surveys

showed manufacturing activity there returned to growth in June

after nearly a year of contraction.

EUROSTOXX 50 futures lost 0.4%, while FTSE futures

fell 0.3% and DAX futures slipped 0.4%. Europe

and Japan are heavily reliant on imported oil and LNG, whereas

the United States is a net exporter.

The dollar gained 0.7% on the Japanese yen to 147.07 yen

, while the euro dipped 0.2% to $1.1497. The

dollar index firmed marginally to 99.042.

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

of Treasuries, with 10-year yields rising 2 basis

points to 4.395%.

Futures for Federal Reserve interest rates were a

tick lower, likely reflecting concerns a sustained rise in oil

prices would add to inflationary pressures at a time when

tariffs were just being felt in U.S. prices.

Markets are still pricing only a slim chance the Fed will

cut 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 is certain to

cover the potential impact of President Donald Trump's tariffs

and the attack on Iran.

The Middle East will be high on the agenda at a NATO leaders

meeting at the Hague this week, where most members have agreed

to commit to a sharp rise in defence spending.

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.