* Oil climbs on renewed U.S. and Iran hostilities

* Nasdaq leads Wall Street declines

* Dollar rises versus yen and euro

* Investors await US inflation reading due Tuesday

(Updates prices after U.S. market open)

By Sinéad Carew and Stefano Rebaudo

July 13 (Reuters) - Stocks fell and oil prices rallied on

Monday, while government bond yields rose, after U.S. and

Iranian forces renewed exchanges of heavy missile and drone

assaults, with Tehran saying it had again closed the vital

Strait of Hormuz.

Oil added to its gains after President Donald Trump

responded with an announcement that the U.S. was reinstating a

naval blockade on Iran, and would be reimbursed 20% on all cargo

shipped through the strait.

"The trading of bombs between the United States and Iran is

front and center. That's why you're seeing energy prices rally.

It's more of the same uncertainty surrounding where the Middle

East stands. What's going to resolve it and when is it going to

be resolved?" said Robert Pavlik, senior portfolio manager at

Dakota Wealth in Fairfield, Connecticut.

On Wall Street at 11:43 a.m. ET (1543 GMT), the Dow Jones

Industrial Average fell 106.72 points, or 0.20%, to

52,530.29, the S&P 500 was down 30.60 points, or 0.40%,

to 7,544.79 and the Nasdaq Composite fell 247.59 points,

or 0.94%, to 26,034.83.

The technology sector was adding pressure to indexes as

investors sold off stocks related to artificial intelligence and

particularly in semiconductors. Included in the selloff were

U.S.-listed shares of SK Hynix, which fell 8.5% on

Monday after rallying sharply on their Nasdaq debut on Friday.

South Korea's KOSPI sank nearly 9%, after already

losing more than 7% last week, as bets on semiconductor shares

came under pressure. The market has emerged as a key global

barometer for chip-sector sentiment and further losses could

ripple out more broadly.

MSCI's gauge of stocks across the globe was

down 6.80 points, or 0.60%, at 1,119.74. The pan-European STOXX

600 index fell 0.06%.

Meanwhile, U.S. Treasury yields rose as intensifying

hostilities between the U.S. and Iran fanned concerns about

inflation pressures and their impact on Federal Reserve monetary

policy.

The yield on benchmark U.S. 10-year notes rose

2.85 basis points to 4.598%, from 4.569% late on Friday while

the 30-year bond yield rose 2.17 basis points to

5.0927%.

The 2-year note yield, which typically moves in

step with interest rate expectations for the Federal Reserve,

rose 3.99 basis points to 4.248%, after hitting its highest

levels since February 2025.

The U.S. dollar inched up as traders monitored geopolitics

and how it might affect the rate outlook, just a day before the

release of key U.S. inflation data.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

rose 0.06% to 101.12, with the euro down 0.11% at $1.14.

Against the Japanese yen, the dollar strengthened

0.4% to 162.33.

Sterling weakened 0.2% to $1.3378 at the start of a

pivotal week in British politics as Andy Burnham is expected to

be formally anointed as Labour leader on Friday and be

officially named as UK prime minister on July 20.

In energy markets, oil prices rose more than 4% on Monday

after Trump's comments reignited concerns over energy shipments.

U.S. crude rose 4.47% to $74.60 a barrel and Brent

rose to $79.36 per barrel, up 4.41% on the day.