* Oil prices choppy on report IEA proposes largest ever

oil release from strategic reserves

* Shares rise on relief rally though market sentiment

fragile

* Dollar holds gains, yen on the cusp of 159 level

* U.S. inflation data due later on Wednesday

(Updates to Asia afternoon)

By Rae Wee

SINGAPORE, March 11 (Reuters) - Shares steadied on

Wednesday following a retreat in oil prices, but contradictory

signals from the U.S.-Israeli war on Iran kept investors anxious

over the risks to inflation and global growth.

A pullback in oil came after the Wall Street Journal

reported that the International Energy Agency has proposed the

largest release of oil reserves in its history to bring down

crude prices, providing some relief to battered global stocks

while currencies and bonds were little changed.

Brent crude futures swung between gains and losses

in volatile trade, falling 0.4% to $87.45 per barrel, while U.S.

crude was up 0.3% at $83.67 a barrel.

"Markets are presently trading on the news flow and the

here-and-now rather than being forward-looking," said Chidu

Narayanan, head of APAC macro strategy at Wells Fargo.

"The measures announced aiming to offset oil supply declines

might be insufficient. It is likely to help on the margin to

assuage some of the fears, but as long as the conflict

continues, risk aversion is likely to remain elevated."

Still, regional stocks found some reprieve, with MSCI's

broadest index of Asia-Pacific shares outside Japan

up 1.4%, while the Nikkei rose 1.7% and

South Korea's Kospi advanced 1.75%.

U.S. stock futures also pushed higher after a mixed cash

session overnight, with Nasdaq futures and S&P 500

futures adding about 0.2% each.

EUROSTOXX 50 futures slipped 0.12%, while FTSE

futures lost 0.14%.

Investors remain on edge as the Middle East conflict

threatens to freeze global energy trade and ignite a price shock

- a risk that world leaders are scrambling to address.

Still, energy markets remain hostage to how long - and how

intense - the conflict becomes.

"Several major questions loom over the oil market's

trajectory. Chief among them is the timing of safe passage for

vessels through the Strait of Hormuz, a critical chokepoint for

global oil supply," said Kerstin Hottner, Vontobel's head of

commodities.

"Another concern is the possibility of infrastructure

damage... Even if major hostilities subside, the prospect of

ongoing low-level Iranian drone attacks on energy infrastructure

could prolong market instability into next year."

DOLLAR FEVER

The dollar held to its gains on Wednesday as investors

assessed the fallout from the war, with the greenback proving

the safe-haven asset of choice in the ongoing market turmoil.

Against the yen, the dollar was up slightly at

158.15, while the euro and sterling were nursing

losses and fetched $1.1633 and $1.3450, respectively.

"You have only one safe asset, which has been the U.S.

dollar," said Frank Benzimra, head of Asia equity strategy and

multi-asset strategist at Societe Generale.

"Even gold or Treasuries did not play this huge safe haven

role. In the case of Treasuries, because of the inflation

concerns, and in the case of gold, because we could see some

investors selling their gains in gold to offset some losses in

the equity market."

Bond markets have come under pressure over the past few

sessions on risks that the prolonged spike in energy prices

could stoke inflation and cause central banks across the globe

to turn more hawkish.

U.S. Treasuries steadied on Wednesday, with the yield on the

benchmark 10-year note little changed at 4.1440%,

while the two-year yield was at 3.5757%.

"The general tone of central banks will remain hawkish so

long as the threat of the war's inflationary implications

persist," said Thierry Wizman, global FX and rates strategist at

Macquarie Group.

"We would expect that this more hawkish disposition persists

even after hostilities end, largely because the data may

continue to point to inflationary pressures throughout the

period in which inflation may show up in the data."

February's U.S. inflation reading is due later on Wednesday.

In precious metals, spot gold was up 0.17% at

$5,200.35 an ounce.