* Brent breaches $119 a barrel as Iran conflict worsens

* US Treasury yields climb but off earlier highs

* Multiple central banks keep rates unchanged

(Adds close of European markets, new analyst comment in

paragraphs 6-7)

By Chuck Mikolajczak

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

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

with Iran caused another spike in oil prices, while a host of

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 0.46% to $96.76 a barrel and Brent

rose to $108.68 per barrel, up 1.21%. Brent had earlier

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

that threshold this month, but prices eased as the Trump

administration took steps to try and expand supply.

On Wall Street, U.S. stocks were lower, and declines in the

small-cap Russell 2000 index briefly brought the index

down more than 10% from its January 22 record closing high. Of

the 11 major S&P 500 sectors, only energy was in

positive territory on the day.

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.

"There was a real reluctance to attack oil infrastructure

and investors are now reevaluating where this goes going

forward," including the possibility that the crisis lasts longer

than anticipated, said Michael Arone, chief investment

strategist at State Street Investment Management in Boston.

"The second part of it, of course, is that all these global

central banks have acknowledged just how difficult the Iran

conflict in the Middle East is to price into their outlooks and

they're all in a holding pattern, and so both of those things

are contributing to a risk-off environment today."

The Dow Jones Industrial Average fell 386.30 points,

or 0.83%, to 45,839.97, the S&P 500 lost 45.45 points, or

0.68%, to 6,579.49 and the Nasdaq Composite stumbled

183.18 points, or 0.83%, to 21,969.24.

MSCI's gauge of stocks across the globe fell

12.27 points, or 1.22%, to 993.20 while the pan-European STOXX

600 index fell 2.39%, its biggest daily percentage drop

since March 3 as the index closed at its lowest level in three

months.

Benchmark government bond yields, which set the global cost of

borrowing, also climbed 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 29.8 basis points

to 4.404% after earlier touching a 14-month high of 4.486%,

although Bank of England Governor Andrew Bailey said financial

markets were getting ahead of themselves in expecting interest

rate rises. Sterling strengthened 1.12% to $1.3402

against the dollar.

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

2.2 basis points to 4.279% while the 2-year note

yield, which typically moves in step with interest rate

expectations for the Fed, jumped 11.5 basis points to 3.858%.

The two-year yield has shot up about 46 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, dropped 0.81% to 99.39, with the

euro up 0.95% at $1.1559.

Against the Japanese yen, the dollar weakened 1.28% to

157.82 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.