(Updates to US market close)

* Global stocks decline

* Brent crude prices surge to $103 per barrel

* Traders rapidly reduce Fed rate cut wagers for year

* US dollar continues its climb

By Lawrence Delevingne and Lucy Raitano

BOSTON/LONDON, March 13 (Reuters) - Stocks fell and the

U.S. dollar strengthened on Friday as uncertainty over the Iran

war continued to disrupt energy supplies, heightening concerns

over fuel prices and interest rates.

The price of oil crossed $100 per barrel even as an Indian

tanker sailed out of the Strait of Hormuz and the U.S. put forth

measures to try to ease supply concerns.

All three major U.S. stock indexes logged daily and weekly

declines. The Dow Jones Industrial Average finished

Friday down 0.25%, the S&P 500 fell 0.6% and the Nasdaq

Composite dropped 0.9%.

European shares extended their declines as well, with Europe's

STOXX 600 down 0.5% on Friday. MSCI's gauge of stocks

across the globe fell 0.9%.

The dollar has become the safe haven of choice during the

tumult, putting most other currencies under pressure. The U.S.

currency gained for the second consecutive week, up 0.8% on the

day against a basket of currencies.

OIL PRICE DRIVING MARKET

President Donald Trump said the U.S. was going to be hitting

Iran "very hard over the next week," shortly after issuing a

partial 30-day waiver for purchases of sanctioned Russian oil,

hoping to ease prices.

Front-month WTI crude futures settled at $98.71 per

barrel, up 3.11%. Brent rose 2.67% to $103.14, settling

above $100 per barrel for the first time since August 2022.

Traders are trying to predict how long the disruption to oil

supplies will last.

"Headlines are coming at the market like water from a fire

hose, which is impacting the price of oil, and consequently,

financial markets," said Mitch Reznick, group head of fixed

income at Federated Hermes.

With Iran stepping up attacks across the Middle East as its

new Supreme Leader Mojtaba Khamenei vowed to keep the Strait of

Hormuz shipping lane closed, investors are bracing for a

prolonged conflict and higher oil prices.

The spectre of rising inflation has led markets to rapidly

reprice what they expect from central banks this year, with

traders now anticipating just 20 basis points of easing from the

Federal Reserve compared to 50 bps of cuts priced in last

month.

Two-year Treasury yields, which typically move in step with

Fed interest rate expectations, hit a six-month high on

Thursday.

Elsewhere, the Personal Consumption Expenditures index, the

Federal Reserve's preferred inflation gauge, rose 0.3% in

January on a monthly basis, in line with economists' estimates.

At the same time, U.S. economic growth slowed more sharply than

initially thought in the fourth quarter amid downward revisions

to consumer spending and business investment, government data

showed on Friday.

"With markets laser-focused on oil prices and geopolitics,

today's numbers may mostly fly under the radar," Ellen Zentner,

chief economic strategist for Morgan Stanley Wealth Management,

said in an email.

"Despite signs of economic softening, more sticky inflation

data simply strengthens the idea that the Fed will remain on the

sidelines."

SHIFTING RATES OUTLOOK

Interest rate futures that had been priced for two quarter-point

cuts by the end of the year before the conflict began are now

barely pricing in one.

For U.S. government bond trading on Friday, the two-year note

yield fell 3.3 bps to 3.73% after hitting its highest

level since August 22 on Thursday. U.S. 10-year notes

ticked up to 4.283%.

Investor focus will switch to a slate of policy meetings

next week, with the Fed, the Bank of Japan, the European Central

Bank and the Bank of England all due to meet, with most expected

to keep rates unchanged.

In currencies, the euro fell 0.8% to $1.1417, while

the yen hit its weakest since July 2024 at 159.66 per

U.S. dollar on Friday as Japan warned it was ready to take

action to protect against yen declines.

Analysts said the bar for intervention is higher this time

around, as any action now could prove futile in the face of

relentless dollar buying.

Gold was 1.27% lower at $5,014 per ounce on Friday,

capping a drop on the week.