(Updates prices throughout, adds oil settlement)

* Hopes fade for Strait of Hormuz breakthrough

* Stocks dip, but AI hype provides support

By Chibuike Oguh

NEW YORK, June 3 (Reuters) - Global equity markets fell

while oil prices rose on Wednesday as hopes of a quick end to

the Middle East conflict faded with hostilities flaring up.

On Wall Street, all three indexes pulled back from recent

record highs, with technology and financial shares driving

losses while energy stocks led gains.

The Dow Jones Industrial Average fell 0.84%, the S&P

500 lost 0.48%, and the Nasdaq Composite fell

0.72%.

The pan-European STOXX 600 index dipped 0.66%.

MSCI's gauge of stocks across the globe fell

0.47%.

Iranian attacks on Kuwait damaged its airport and injured

dozens, while the U.S. military carried out strikes near the

Strait of Hormuz, with diplomacy to halt the war showing little

progress.

"The broad market and the tech sector have led this strong,

strong rally for the past several sessions and today's taking a

breather," said Wasif Latif, chief investment officer at Sarmaya

Partners.

"The headline coming out of the Middle East with the Iran

war continuing to escalate, de-escalate, escalate, and then

de-escalate again. That's the reason for the market selloff

today."

Oil prices crept toward $100, with global benchmark Brent

crude adding 1.89% to settle at $97.81 a barrel.

AI HALO

Investor euphoria over AI underpins markets. In Asia, stock

indexes climbed to record highs in Japan and Taiwan.

Shares in Marvell Technology ( MRVL ) were up 4.5%, extending

gains from a record high in the prior session after Nvidia ( NVDA )

boss Jensen Huang called the chipmaker the next

trillion-dollar company.

SpaceX - which is largely focused on AI - plans to raise $75

billion in a blockbuster initial public offering, according to a

source familiar with the matter.

"Our view continues to be that this strong run-up in

semiconductors and data center demand is a lot of pulling

forward of future demand and consumption, and that's helping the

economy," Latif added.

YEN INTERVENTION WORRIES

Currency traders were on edge, however, after the dollar

rose against the Japanese yen to the 160 level at

which the market tends to become nervous about intervention from

authorities in Tokyo.

The Japanese yen weakened 0.09% against the greenback

to 160 per dollar.

The fall in the yen prompted warnings from the finance minister

on Wednesday.

The euro was down 0.28% against the greenback at

$1.1598.

The dollar index, which tracks the currency against

its peers, rose 0.23% to 99.52.

Markets, which had expected rate cuts before the Iran war,

have pretty much priced out U.S. rate increases this year.

A hike in Europe next week is all but fully priced in following

data showing inflation accelerated last month, while traders

predict about a 75% chance of a June rise in Japan.

U.S. 10-year Treasury yields rose 3.4 basis points to 4.489%

. Data showed U.S. private payrolls increased more

than expected in May. More comprehensive official jobs numbers

are due on Friday.

Spot gold fell 0.99% to $4,440.13 an ounce.