(Updates throughout, adds oil settlement and analyst quote)

* Selloff in technology shares drags markets lower

* Wall Street and European shares fall

* Oil prices dip but set for weekly gain as hopes for

US-Iran peace deal dim

* US employers add more jobs than expected in May

By Chibuike Oguh

NEW YORK, June 5 (Reuters) - Shares fell sharply on

Friday after a blowout jobs report fueled bets of a rate hike by

the U.S. Federal Reserve and as investors turned defensive ahead

of the weekend, wary of the flare-up in Middle East hostilities.

Iran reaffirmed support for the Hezbollah militia and demanded

Israel withdraw from southern Lebanon, complicating efforts to

end the broader conflict between the U.S. and Iran. Israel has

said it would not withdraw troops from Lebanon.

On Wall Street, all three indexes were lower, led by a selloff

in technology shares, including AI chipmaker Nvidia ( NVDA ).

Shares in Broadcom ( AVGO ) were down nearly 7%, continuing

losses since the semiconductor company reported underwhelming

results on Wednesday.

The Dow Jones Industrial Average fell 1%, the S&P 500

lost 2.4% and the Nasdaq Composite dipped 4%.

Data showed U.S. employers added far more jobs than expected

in May, bolstering bets that the Fed could raise rates late this

year.

U.S. Treasury yields surged following the report, with the

yield on the 2-year note, which typically moves in

step with Fed rate expectations, hitting a 15-month high. It was

last at 4.164%.

"We're talking about a strong economy," said Gary

Schlossberg, market strategist at Wells Fargo Investment

Institute.

"That just adds to inflation risk coming from the Gulf. It

makes it difficult for the Fed to even think about rate cuts and

might even increase the chances - although we're still not

forecasting that yet - of a rate hike by the Fed before the end

of the year against the backdrop of inflation."

The pan-European STOXX 600 index eased 0.29%.

MSCI's gauge of stocks across the globe fell

2.23%.

"There are some near-term pressures on the short end of the

curve and it's largely because of the geopolitical impact on the

price of oil and headline inflation but looking through that, we

also understand that these pressures tend to be temporary and

calm back down," said Talley Leger, chief market strategist at

the Wealth Consulting Group.

OIL SET FOR WEEKLY GAIN

Oil prices slipped after Oman said operations at Mina al

Fahal port were proceeding normally following a Reuters report

that oil loadings had been suspended after an explosion.

Brent crude futures fell 2% to settle at $93.09 a

barrel and U.S. crude dipped 2.69% to $90.54 per barrel,

with both contracts set to post their first weekly gains in

three weeks.

In currencies, the yen settled around the 160 per dollar

level and was last down 0.09% at 160.12, as Japanese officials

ramped up warnings about the ailing currency, keeping traders on

alert for further intervention from Tokyo.

Data on Friday showed Japan's foreign reserves fell by $77

billion in May.

The euro was down 0.74% at $1.1523. Sterling

weakened 0.64% to $1.3334.

The dollar index was on track to gain 0.62%,

supported by the Middle East conflict.

Cryptocurrencies extended recent declines, with bitcoin

shedding 6.04% to $59,746.51 and heading for a weekly

decline of nearly 18%, its biggest since the week FTX collapsed

in November 2022, while ether declined 12.02% to

$1,559.57.

Spot gold fell 3.49% to $4,317.64 an ounce.