* Nikkei slips, S&P futures down ahead of Nvidia ( NVDA ) results

* China economic data disappoints, consumers not buying

* Oil prices gain on reports of drone attacks in Gulf

* Mounting inflation concerns keep bonds on back foot

(Adds China data, updates prices)

By Wayne Cole

SYDNEY, May 18 (Reuters) - Asian share markets were on

the skids on Monday as fresh drone attacks in the Gulf shoved

oil prices and bond yields higher, while the AI boom is set to

be tested by earnings from Nvidia ( NVDA ) this week.

A drone strike caused a fire at a nuclear power plant in the

United Arab Emirates, while Saudi Arabia reported intercepting

three drones, as U.S. President Donald Trump warned that Iran

must act "fast" to reach a deal.

Meanwhile, the vital Strait of Hormuz remains closed to all

but a trickle of shipping as Tehran tries to formalise its

control of the waterway that during normal times carries 20% of

the world's oil trade.

"The closure is draining global oil inventories fast,"

warned analysts at Capital Economics. "Inventories could reach

critical levels by end-June, setting the stage for Brent at

$130-140pb, if not higher."

"If the strait is closed through year-end and oil stays

around $150pb into 2027, that would push inflation to near 10%

in the UK and euro zone, send rates back to their recent peaks

and lead to global recession."

Brent was trading up 1.9% at $111.34 a barrel, while

U.S. crude climbed 2.3% to $107.84 a barrel.

G7 finance ministers are scheduled to gather in Paris on

Monday to discuss the Strait of Hormuz and critical raw material

supplies, even as geopolitical differences threaten to test the

group's cohesion.

Global bond markets were hammered on Friday on concerns that

energy costs would stay high and thus continue to drive

inflation.

Yields on U.S. 10-year notes hit a 15-month

top of 4.631%, having already surged 23 basis points last week.

Yields on 30-year bonds reached 5.159% after

jumping 18 basis points on the week.

Japanese yields hit peaks not seen since 1996 as the

government proposed to issue fresh debt to fund a planned extra

budget to cushion the economic blow from the U.S.-Israeli war on

Iran.

Investors in turn feared central banks globally would have

to tighten to head off an inflationary spiral and a hike from

the Federal Reserve is now seen as a 50-50 chance this year.

Minutes of the Fed's last meeting are out on Wednesday and

should show how much pressure there was on the committee for a

shift to a neutral stance and away from an easing bias.

Japan's Nikkei eased 1.1%, having fallen 2% last

week from record highs. South Korean stocks fell 0.1%,

as the red-hot market cooled just a little after demand for

semiconductors drove it to all-time peaks.

MSCI's broadest index of Asia-Pacific shares outside Japan

lost 0.9%.

Chinese blue chips held steady, having hit their

highest level in more than four years last week.

Economic data disappointed as April retail sales edged up

0.2% when analysts had looked for growth of 2.0%, while

industrial output rose a sluggish 4.1%.

AI, RETAIL EARNINGS TO TEST THE BULL RUN

S&P 500 futures fell 0.6% and Nasdaq futures

lost 0.8%. For Europe, EUROSTOXX 50 futures and DAX

futures both fell 1.0%, while FTSE futures were

flat.

While Wall Street has been supported by upbeat earnings,

analysts at Citi noted that half of the boost to earnings came

from one-time items like tariff add-backs and asset mark-ups.

Both the gains in profits and the overall indexes were also

tightly based.

"We identify 20 stocks that contributed the majority of

index earnings upside," analyst Scott Chronert wrote in a note.

"Forward guidance increases also show a similar narrow focus."

"Broadening is a necessary condition for meaningful index

upside from here," he added. "This will require a better line of

sight to the Iran conflict wind-down."

Rising yields also push up borrowing costs for the U.S.

government and home buyers, a negative for the budget deficit

and housing markets. They also mean a higher discount for future

company earnings, challenging stock valuations.

The all-important AI trade will be tested by earnings from

Nvidia ( NVDA ) that are due on Wednesday, where expectations

are sky-high for the world's most valuable company.

Nvidia ( NVDA ) shares are up 36% since a March low, while the

Philadelphia SE semiconductor index has surged more than

60%, amid voracious demand for chips as tech companies spend

massively to build AI-related infrastructure.

Also due this week are results from a host of retailers led

by Walmart ( WMT ), which will provide an insight into how

consumers are faring with high energy prices.

In forex markets, risk aversion has tended to benefit the

greenback as the world's most liquid currency. The U.S. is also

a net energy exporter, giving it a relative advantage over

Europe and much of Asia.

The euro sat at $1.1616 after losing 1.4% last

week. The pound wallowed at $1.3311, having dived 2.3%

last week as political instability added to already intense

pressure on the gilt market.

The dollar held firm against the yen at 158.91,

with only the threat of Japanese intervention preventing another

speculative assault on the 160.00 chart barrier.

In commodity markets, gold dipped 0.2% to $4,527 an ounce

, having drawn little support so far as a safe haven or as

a hedge against inflation risks.