(Updates to midday U.S. market trading)

* Oil surges above $100 a barrel then gives up some gains

* Wall Street, global stocks skid

* Bond yields advance, Fed fund futures ease on inflation

risk

* Dollar in demand as source of liquidity, euro drops

By Lawrence Delevingne and Nell Mackenzie

BOSTON/LONDON, March 9 (Reuters) - Global stock prices

fell on Monday and investors desperate for liquidity bid up the

U.S. dollar, as surging oil priceslooked likely to stoke

inflation around the globe, leading central banks to raise

interest rates.

Crude oil futures in London and New York soared almost 30% in

early trading to nearly $120 a barrel, one of the biggest

one-day jumps on record, threatening to raise costs of products

from gasoline to jet fuel. Oil pared gains, with U.S. crude

last up5.45% at $95.85 a barrel and Brent at

$98.66 per barrel, up 6.34%.

Soaring energy prices triggered a wave of global stock and bond

market selling. The Dow Jones Industrial Average fell

0.8%, the S&P 500 dropped 0.5%, and the Nasdaq Composite

slid 0.23% as of midday.

Iran named Mojtaba Khamenei to succeed his father Ali

Khamenei as Supreme Leader, signalling that hardliners remained

in charge a week into the war with the U.S. and Israel. U.S.

President Donald Trump had declared the son "unacceptable."

With hostilities continuing and tankers fearing Iranian drone

attacks unable to cross the Strait of Hormuz, investors were

bracing for a long stretch of higher energy costs.

Investors awaited Washington's response, said Helima Croft,

head of global commodity strategy at RBC Capital Markets. "With

no clear definition of what winning looks like, it is hard to

forecast whether this will be a multi-week or multi-month

conflict."

GLOBAL MARKETS SINK

European shares tumbled to their lowest in more than two

months, with the pan-European STOXX 600 down 1.76% in a

third session of losses. The benchmark index shed 5.5% last

week, its worst weekly performance in nearly a year.

The oil price spike was sobering for major oil importers in

Asian markets, with Japan's Nikkei closing down 5.2%

after a 5.5% drop.

China, another big oil importer albeit with a huge stockpile of

crude, saw its blue-chip index fall roughly 1%. China

on Monday said inflation had already picked up in February

before the current oil surge, with consumer prices rising 1.3%

on the year, not necessarily a negative development, given the

country has long struggled with disinflation.

Lisa Shalett, chief investment officer at Morgan Stanley

Wealth Management, wrote in a note on Monday that the U.S.

equity market may still seem placid but there are "extreme"

rotations and stock dispersions beneath the surface.

"Over the past 80 years, war-induced oil shocks have not

been kind to equities, as nearly every episode has catalyzed a

recession and market sell-off," Shalett wrote.

CENTRAL BANKS FACE INFLATION CONUNDRUM

In bond markets, the risk of rising inflation outweighed

safe-haven considerations to shove yields higher globally. The

move was more subdued in the U.S., with yields on 10-year

Treasury notes up 0.6 basis points to 4.132%, up

from a trough of 3.926% just a week ago.

Interest rate futures slipped as investors feared the

risk of higher inflation would make it harder for the Federal

Reserve to ease policy, though disappointing U.S. jobs numbers

seemed to argue for stimulus.

Data on U.S. consumer prices due on Wednesday is forecast to

show the annual rate holding at 2.4% in February.

The Fed's preferred measure of core inflation due on Friday

is forecast to hold at 3.0%, well above the central bank's 2%

target, and analysts see a risk of an even higher number.

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.

For the Bank of England, markets have shifted to pricing

just a 40% chance of one more easing, compared with two cuts or

more before the Middle East conflict started.

Nervous investors sought the liquidity of dollars while

shunning currencies from countries that are net energy

importers, including Japan and much of Europe.

The dollar jumped 0.25% to trade at 158.19 yen,

outweighing safe-haven demand and pushing gold down about 1.36%

to $5,099 an ounce. The euro slipped 0.27% to $1.158

. In cryptocurrencies, bitcoin gained 2.85% to

$69,133.52.