(Updates at 0805 GMT)

By Huw Jones

LONDON, April 19 (Reuters) - Global shares eased, oil

prices surged and U.S. bond yields fell on Friday after reports

that Israel attacked Iran, in the latest reminder of how the

Middle East tinderbox is casting a growing shadow over markets.

Israel's attack on Iranian soil was the latest tit-for-tat

exchange between the two arch foes, sending safe haven

currencies such as the yen and Swiss franc higher and putting

gold on track for its fifth week of gains.

Oil prices jumped $3 a barrel on concern that Middle

East oil supply could be disrupted, but later pared some of the

gains after Iran said it has not plans for an immediate

retaliation, denying that any attack had taken place.

U.S. Treasuries rallied, pushing down yields on the

benchmark 10-year bond to 4.5899%.

The MSCI All Country stock index was down

0.38% at 746.54 points, retreating further from its lifetime

high of 785.62 points a month ago, though still up about 3% for

the year.

In Europe, the STOXX index of 600 leading companies

was down 0.7%.

Markets are caught in the crosshairs of a "triple whammy" -

a U.S. Federal Reserve reluctant to cut interest rates,

disappointing semiconductor earnings, such as at Taiwan's TSMC,

and rising geopolitical risks.

Naka Matsuzawa, chief macro strategist at Nomura in Tokyo

said the events in the Middle East exacerbate the trend of

rising global inflation expectations.

"This is not just a Middle East thing that causes the risk

off now. More fundamentally, it's the fading rate-cut

expectations by the Fed, and on the back of it is higher

inflation expectations, and this conflict...makes the thing

worse basically," Matsuzawa said.

U.S. stock index futures were down

about 0.4%, with no major data expected before the opening bell.

Netflix ( NFLX ) will be an initial focus on Wall Street

after its shares fell after-hours on Thursday when the company

unexpectedly announced that it will stop reporting subscriber

numbers each quarter, seen as a sign that years of customer

gains in the streaming wars are coming to an end.

Ross Yarrow, managing director of equities at RW Baird, said

the tensions in the Middle East have the potential to tick the

two biggest inflation risk boxes.

"The first of that is an oil shock - we have seen this tape

play out before, with Brent over $100 a barrel and so on,"

Yarrow said.

"The other is container shipping costs," Yarrow said, adding

that so far there was no sign of these going back up after their

blip higher earlier in the year due to tensions in the Red Sea.

Meanwhile, first quarter earnings season gets underway, with

market expectations quite low with pressure on a narrow group of

stocks to perform, Yarrow added.

CHIPS ARE DOWN

Equity markets were already heading lower before the Middle

East headlines, as more robust U.S. economic data spurred

additional Fed officials to signal no rush to lower interest

rates.

Chip-sector stocks were hit particularly hard by both the

outlook for protracted tight monetary policy and investor

disappointment at Taiwan Semiconductor Manufacturing Co's ( TSM )

decision to leave capital spending plans unchanged.

The stock slumped as much as 6.6%.

A day earlier, ASML, the largest supplier of

equipment to computer chip makers, reported lacklustre new

bookings.

MSCI's broadest index of Asia-Pacific shares

was down 1.7%, after earlier diving as much as 2.6%.

The safe-haven yen rallied as much as 0.7% against the

dollar, but was last trading little changed on the day.

The Swiss franc was about 0.6% higher versus the dollar, paring

earlier gains of as much as 1.2%.

Gold was 0.3% higher at $2,385 an ounce, but had

risen as far as $2,417.59, just shy of last week's all-time high

at $2,431.29.

Brent futures surged as much as 4.2% and were last

up 0.9% at $87.95. Iran is the third-largest oil producer of the

Organization of the Petroleum Exporting Countries, according to

Reuters data.

Bitcoin was up 1.6% at $64,559.

Japan's Nikkei was last down 2.6%, while Taiwan's

stock benchmark fell 3.8%. Hong Kong's Hang Seng

lost 0.9%.