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Wall Street stocks trade down

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Oil prices gain 5%

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US dollar edges higher

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Safe-haven gold pares losses

(Adds analyst comment, updates prices throughout)

By Chibuike Oguh and Iain Withers

NEW YORK/LONDON, Oct 3 (Reuters) - Global stocks fell on

Thursday, weighed by tepid trading in equity markets across the

U.S. and other major regions, even as oil prices extended gains

amid rising geopolitical tension from the Middle East

conflict.

Wall Street's main indexes pared early gains and were

trading slightly down. Data released on Thursday showed rising

U.S. jobless claims, indicating labor market softness, but

strong service-sector activity. The closely watched nonfarm

payrolls report for September is due on Friday.

The Dow Jones Industrial Average fell 0.77% to

41,870.37, the S&P 500 fell 0.50% to 5,681.20 and the

Nasdaq Composite fell 0.40% to 17,853.07.

European stocks finished down 0.93% as investors

digested weak business activity survey data from the bloc.

MSCI's gauge of stocks across the globe fell

0.59% to 840.49.

Asia-Pacific shares outside Japan had

earlier shed 1.3% overnight, largely driven by Hong Kong stocks

sagging after a sizzling rally, with several markets,

including mainland China and South Korea, closed for the day.

Japan's Nikkei, however, ended up nearly 2% after

the country's newly elected prime minister Shigeru Ishiba said

it was not the time to raise rates after meeting Bank of Japan

Governor Kazuo Ueda.

Geopolitical tensions loomed large, after Israel bombed

Beirut early on Thursday, following a year of clashes with

Iran-backed Hezbollah.

Oil prices gained on Thursday as concerns grew that the

conflict could disrupt crude oil flows from the key exporting

region, overshadowing a stronger global supply outlook.

Brent and U.S. crude futures gained 5% each to $77.48 and

$73.65, respectively.

"The fact that energy is up where everything else is down

pretty significantly is an indication that today's move is a lot

about the escalating conflict in the Middle East," said James

St. Aubin, chief investment officer at Ocean Park Asset

Management in Santa Monica, California.

"There's probably some trepidation or maybe some hesitation

about putting money to work ahead of tomorrow's jobs report."

Gold prices rebounded from early losses as the U.S. dollar

strengthened against major currencies. Spot gold rose

0.09% on the day to $2,658.87, hovering near record highs.

In currencies, the U.S. dollar index gained 0.26% to

101.91. The euro was slightly down at $1.1029, and not

far from Wednesday's low of $1.10325, a level last seen on Sept.

12.

Sterling weakened 1.1% to $1.3123 after Bank of

England Governor Andrew Bailey told the Guardian newspaper that

the central bank could become a "bit more aggressive" on rate

cuts if inflation continued to ease. Against the Japanese yen

, the dollar strengthened 0.1% to 146.61.

Treasury yields rose after the jobless claims data and

service sector report. Two-year Treasury yields were

last up at 3.6951% on Thursday, while benchmark 10-year yields

were at 3.831%.

Markets imply a 35% chance the Fed will cut interest rates

by another 50 basis points in November, compared with almost 60%

last week, and have around 70 basis points of easing priced in

by year-end.