* Oil prices surge again, with Brent closing in on $100 a

barrel

* Nikkei off 1.6%; Wall St, European futures in the red

* Bond yields climb, market pare back bets for Fed cuts

* Euro, yen under pressure, dollar shines

By Stella Qiu

SYDNEY, March 12 (Reuters) - Shares fell in Asia on

Thursday as oil prices jumped on reports that more ships had

been struck in the Strait of Hormuz and in Iraqi waters,

fuelling inflation and pushing borrowing costs higher

worldwide.

U.S. crude rose 7.5% to $93.80 a barrel, reversing a

fall of 11% overnight. Brent crude futures jumped 7.7%

to $99.03 a barrel.

That was despite plans from the International Energy Agency to

release 400 million barrels of oil from its reserves, the

largest such move in its history. The U.S. said it would release

172 million barrels of oil from next week, as part of the IEA

plan.

Two fuel tankers in Iraqi waters had been struck by

explosive-laden Iranian boats, Iraqi security officials said

early on Thursday, while an Iraqi official told state media that

oil ports "have completely stopped operations."

"Multiple tankers loaded with Iraqi crude are now reported

burning in the Persian Gulf off the coast of Basra, engulfed in

flames and leaking burning oil into the water," said Tony

Sycamore, analyst at IG.

"This appears to mark a direct and forceful Iranian response

to the IEA's overnight announcement of a massive strategic

reserve release aimed at cooling runaway prices."

Iran had earlier stepped up attacks on merchant ships in the

Strait of Hormuz, telling the world to get ready for oil at $200

a barrel. On Wednesday, three vessels were reported to have been

hit in Gulf waters as Iran's Revolutionary Guards said their

forces had fired on ships in the Gulf that had disobeyed their

orders.

U.S. President Donald Trump on Wednesday declared the war on

Iran has been won but he will stay in the fight to finish the

job, throwing more uncertainty in the mix.

All of this was bad for shares. MSCI's broadest index of

Asia-Pacific shares outside Japan fell 0.8%,

while the Nikkei dropped 1.6% as Japan is a major

importer of oil and gas.

Both S&P 500 futures and Nasdaq futures fell

0.8%. Over in Europe, EUROSTOXX 50 futures fell 0.6%

and DAX futures slid 0.8%.

INFLATION RISKS

U.S. data showed the consumer price index rose 0.3% in February,

in line with forecasts and above January's 0.2% increase, but it

was rendered obsolete given the Iran war has fuelled

inflation.

In bond markets, the risk of rising inflation outweighed

safe-haven considerations to shove yields higher globally.

Yields on 10-year Treasury notes rose 4 basis points

to 4.2472% on Thursday, having jumped 6 bps overnight.

Fed funds futures extended their slide as investors feared

higher inflation would make it harder for the Federal Reserve to

ease policy. Markets are just wagering one more rate cut from

the Fed this year.

The danger of energy-driven inflation has led markets to

wager the next move in rates from the European Central Bank

could be up, possibly as early as June.

Nervous investors sought the liquidity of dollars while

shunning currencies from countries that are net energy

importers, including Japan and much of Europe.

The euro slipped 0.3% to $1.1536, after closing at

the weakest level since November last year. The dollar inched up

0.1% to 159.12 yen, the strongest level since January

when reported rate checks from the U.S. Fed spooked yen bears.

The risk sensitive Australian dollar lost 0.4% to

$0.7127, having hit a more than three-year high of $0.7188 on

Wednesday as bets for an imminent rate hike from its central

bank grew.

(Reporting by Stella Qiu; Editing by Lincoln Feast.)