* Oil surges as Iran conflict worsens

* US Treasury yields climb but off earlier highs

* Multiple central banks keep rates unchanged

(Updates to open of US markets)

By Chuck Mikolajczak

NEW YORK, March 19 (Reuters) - Global stocks tumbled on

Thursday as the latest escalation in the U.S. and Israel's war

with Iran caused another surge in oil prices, while major

central banks left interest rates unchanged as they try to gauge

the climb in price pressure.

Attacks on Iran's South Pars gas field, along with the world's

largest gas plant in Qatar as well as on oil refineries in both

Saudi Arabia and Kuwait sent Brent prices shooting above $119 a

barrel and further fanned inflation fears.

U.S. crude rose 1.82% to $98.07 a barrel and Brent

rose to $112.21 per barrel, up 4.5%. Brent had earlier

in the day jumped above $119, the second time it had crossed

that threshold this month.

On Wall Street, U.S. stocks were lower in the early portion of

trading, and declines in the small-cap Russell 2000 index

briefly brought the index down more than 10% from its January 22

record closing high.

The 20-day daily correlation for the S&P 500 to both Brent

and WTI crude is the most negative it has been since November

2004.

"Unfortunately, just tell me where oil's going today and

I'll tell you what the market's going to do today, and that's

the environment we've been in for three weeks. It's an inverse

relationship with a correlation that's quite high," said Art

Hogan, chief market strategist at B. Riley Wealth Management in

Boston.

"It cuts both ways, so central banks can't try to guess

duration, and they certainly can't estimate the offset that you

get."

The Dow Jones Industrial Average fell 458.69 points,

or 0.99%, to 45,766.46, the S&P 500 slumped 52.70 points,

or 0.80%, to 6,572.00 and the Nasdaq Composite dropped

212.20 points, or 0.96%, to 21,940.22.

MSCI's gauge of stocks across the globe fell

14.15 points, or 1.41%, to 991.32 while the pan-European STOXX

600 index fell 2.34% and was on track for its biggest

daily percentage drop since March 3.

Benchmark government bond yields, which set the global cost of

borrowing, also rose as multiple central banks kept rates

unchanged as they assess the economic fallout from the surge in

crude prices.

The Bank of England's rate setters voted unanimously to keep UK

rates on hold and said they were "ready to act" to stave off

risks from war in the Middle East.

The yield on two-year gilts, surged 25 basis points

to 4.36% after earlier touching a 14-month high of 4.486%,

although Bank of England Governor Andrew Bailey said financial

markets are getting ahead of themselves in expecting interest

rate rises.

The European Central Bank held its rates as well, warning

that the Iran war was clouding the outlook for growth and

inflation. The Bank of Japan and the U.S. Federal Reserve had

both voiced their concerns about the conflict during their

earlier policy statements, which left their respective rates

unchanged.

The yield on benchmark U.S. 10-year notes rose 1.8

basis points to 4.275% while the 2-year note yield,

which typically moves in step with interest rate expectations

for the Fed, jumped 10 basis points to 3.843%. The two-year

yield has shot up about 45 basis points in March.

Earlier this week, the Reserve Bank of Australia hiked rates

to a 10-month high and warned of a "material" risk to inflation

from the oil price spike.

In addition, Switzerland's central bank kept its rates at zero,

and signaled it was ready to intervene to curb the recent surge

in the Swiss franc, one of the traditional safe havens in

volatile markets.

The dollar index, which measures the greenback against a

basket of currencies, fell 0.38% to 99.82, with the euro

up 0.46% at $1.1502.

Against the Japanese yen, the dollar weakened 0.91% to

158.41 but remained near the key 160 per dollar level following

the BOJ's policy statement, leaving investors on watch for

possible FX intervention after strong comments from Japanese

Finance Minister Satsuki Katayama earlier in the day.

The Bank of Japan had left its short-term policy rate at 0.75%

as widely expected overnight, but it joined the U.S. Federal

Reserve and Bank of Canada in striking a cautious tone about the

war and pricing pressures.