* Shares rebound after Trump postpones Iran military

strikes

* Oil prices off from highs but movement choppy

* Traders pare back rate hike bets, yields fall

By Rae Wee

SINGAPORE, March 24 (Reuters) - Asian stocks rallied,

oil prices nursed losses and the dollar wobbled on Tuesday after

U.S. President Donald Trump postponed the bombing of Iran's

power grid, allaying fear of a deeper energy shock.

Markets were taken on a rollercoaster ride at the start of

the week after Trump added five days to his Saturday ultimatum

for Iran to reopen the Strait of Hormuz within 48 hours, citing

productive talks with unidentified Iranian officials, which

Tehran has denied.

"It's a negotiating tactic... I don't think that the U.S.

administration wants to see oil at $150 because they themselves

provoked it," said Rajeev De Mello, chief investment officer at

GAMA Asset Management.

Traders were quick to react to the reversal, sending crude

futures tumbling and shares surging, while the dollar and

government bond yields fell.

Most of the movement carried over to the Asian trading

session on Tuesday, with MSCI's broadest index of Asia-Pacific

shares outside Japan rising 1.3%, while shares

in Australia were up 0.7%.

Japan's Nikkei advanced more than 2%, reversing most

of Monday's 3.5% decline.

U.S. futures were little changed after ending Monday's cash

session higher.

Oil prices meanwhile edged higher on Tuesday after sliding

10% in the previous session. Brent crude futures were up

1% at $100.94 a barrel, while U.S. crude rose 1.9% to

$89.84.

Still, movement was highly volatile as war in the Middle

East dragged on and the prospect of higher-for-longer energy

prices lingered.

"Markets are not out of the woods," said Chris Weston, head

of research at Pepperstone.

"Price action could remain choppy into Friday's revised

deadline... The key question is whether participants see this as

a genuine extension that brings a deal closer, or simply a delay

that prolongs uncertainty."

PARING RATE HIKE EXPECTATIONS

Yields on U.S. Treasuries steadied on Tuesday after a sharp

fall overnight, in line with a decline in global bond yields as

investors trimmed bets of aggressive interest rate increases by

major central banks this year.

The two-year yield was little changed at 3.8498%,

having fallen more than 6 basis points in the previous session.

The benchmark 10-year yield was last at 4.3400%.

While traders have priced out the small chance that the U.S.

Federal Reserve could hike this year, they still expect rates to

be left on hold.

The Bank of England is now seen raising rates just twice

this year, compared to four previously, while market

expectations for hikes from the European Central Bank have also

been pared back.

"Unless the Strait (of Hormuz) is reopened very quickly, we

are still more likely than not to see higher interest rates and

a meaningful increase in oil importers' costs in the coming

weeks," said Kit Juckes, head of FX strategy at Societe

Generale.

In currencies, the U.S. dollar was on the back foot after

falling on Monday, as a pick up in risk sentiment reduced demand

for the safe haven currency.

The euro last traded at $1.1603, having risen 0.4%

overnight, while sterling held near Monday's two-week top

and was last at $1.3420.

Against the yen, the dollar was up 0.04% at 158.54.

Data on Tuesday showed Japan's core consumer inflation rate

hit 1.6% in February to slide below the Bank of Japan's 2%

target for the first time in nearly four years, complicating the

bank's efforts to justify further interest rate hikes.

Spot gold was up 0.6% at $4,431.65 an ounce.