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Stocks rise on hope Middle East tensions can be contained

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Oil dips after 10% rally over last month

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Gold ticks higher, but safe-havens not generally in demand

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

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By Marc Jones

LONDON, April 15 (Reuters) - Europe's main share and

currency markets started the week modestly higher while oil and

bond prices dipped, as investors kept Middle East concerns in

check after Iran's weekend attacks on Israel.

Tehran's offensive involved more than 300 missiles and

drones, and was the first on Israel from another country in more

than three decades, but having sold off sharply on Friday and

with major powers urging restraint, Monday's market moves showed

an element of relief.

Oil prices, which have risen 10% as the tensions have

built up over the last month, dropped 1%, Israel's

shekel rose 1% and the pan-European STOXX 600

climbed 0.3%, albeit led by defence stocks.

Gold, which has been hitting record highs for weeks, rose

0.3% but the dollar and the ultra-safe government

bonds that money managers often turn to when

geopolitical tensions mount, were all lower.

Close Brothers Asset Management's Chief Investment Officer

Robert Alster said the hope was that U.S. and Gulf diplomatic

efforts would now prevent further serious escalation of the

Middle East troubles.

"There is a general belief (among investors) that it

isn't going to escalate," Alster said, highlighting that oil

prices hadn't breached their September highs of $96 a barrel.

"There has been a tit-for-tat and hopefully now we move on."

There is also another busy week of economic data and company

earnings in store and the International Monetary Fund's spring

meetings, which can steer the global narrative, get underway

too.

One of those data points is U.S. retail sales later. The

dollar index, which measures the currency against a

basket of six others, was steady at 105.92, just below Friday's

5-1/2 month high of 106.11.

It did though scale a fresh 34-year high against the

Japanese yen on growing expectations that sticky

inflation will keep U.S. interest rates higher for longer and

that Tokyo hasn't rushed to intervene in FX markets yet.

WAIT AND SEE

U.S. stock futures ticked higher, after the heavy selloff on

Wall Street on Friday that had also been fuelled by dwindling

rate cut hopes and a round of disappointing bank earnings.

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

had fallen back as much as 0.7% overnight though

as a sense of nervousness swept over the region. Japan's Nikkei

slid 1%, while Australia's S&P/ASX 200 index

lost nearly 0.5%.

The threat of open warfare erupting between arch Middle East

foes Iran and Israel and dragging in the United States has left

the region on tenterhooks. U.S. President Joe Biden warned

Israeli Prime Minister Benjamin Netanyahu the U.S. will not take

part in a counter-offensive against Iran.

Israel said "the campaign is not over yet".

Oil prices showed traders had largely priced in a

retaliatory attack from Iran, which could lead to more strictly

enforced sanctions on Iranian oil. That saw Brent crude futures

peaking at $92.18 a barrel last week, the highest level

since October.

Monday's 1% drop left Brent back below $90 per barrel, U.S.

West Texas Intermediate crude futures at just under $85 a

barrel while gold was a touch higher at $2,351 an ounce.

"It is something of a wait and see now for markets as we

wait to see how Israel reacts and how Iran's proxies respond,"

said UBS Global Wealth Management multi-asset strategist Kiran

Ganesh said.