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Europe's STOXX up about 0.25%, Asian shares rise despite

conflict concerns

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Oil prices rise 2% on supply concerns after Iran's missile

strike

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Market fallout of escalating tensions muted, for now

(Recasts, updates at 0730GMT)

By Lawrence White

LONDON, Oct 2 (Reuters) - Most stocks held firm on

Wednesday, while oil prices and some safe haven assets rose,

suggesting that the market impact of escalating Middle East

tensions has been contained for now.

Europe's benchmark STOXX index rose 0.24% and

MSCI's broadest index of Asia-Pacific shares

climbed 1.23%, despite fears of a wider conflict following

Iran's ballistic missile strike on Israel.

The safe-haven dollar traded close to its strongest in three

weeks versus the euro.

Macroeconomics also buoyed the dollar, with a resilient U.S.

job market arguing for a smaller Federal Reserve interest-rate

cut in November, and euro zone inflation trends backing a

European Central Bank easing this month.

U.S. S&P 500 stock index futures weakened 0.19%,

after the cash index lost 0.9% overnight.

Mainland Chinese markets were shut for the Golden Week

holiday.

"In the chain of potential market volatility shocks,

geopolitics will typically trump economics, corporate earnings,

or a central bank response - largely because most market players

are poor at pricing risk around these events," said Chris

Weston, head of research at Pepperstone.

"While these events typically reconcile in a market-positive

fashion, the tail risk it can throw up is clearly significant,"

Weston said. "The situation remains fluid, and the slightest

calming or increased aggression in the rhetoric from Israel or

Iran could result in a sizeable impact on sentiment in markets."

Iran said early on Wednesday that its missile attack on

Israel was finished barring further provocation, although Israel

and the U.S. promised retaliation.

Brent crude futures gained 1.9% to $74.99 per

barrel, extending a 2.5% advance from Tuesday. U.S. WTI futures

climbed 2.2% to $71.4 per barrel, after Tuesday's 2.4%

rally.

"Speculation of an Israeli strike on Iranian oil fields

seems unlikely, as such a move would likely drive oil prices

toward $80, displeasing Israel's allies, who are making strides

against inflation," said Tony Sycamore, an analyst at IG.

"Instead, strategic Israeli strikes on critical weapons

factories and military objectives are more probable," he said.

In such a situation, "there is hope for a return to the more

contained shadow conflict that has persisted between Israel and

Iran's regional proxies" for most of the past year, Sycamore

said.

FALLOUT CONTAINED

Elsewhere asset prices moved tentatively, suggesting

longer-term macroeconomic concerns were for now outweighing any

impulsive investor reactions to Middle East events.

Gold eased 0.3% to $2,654.27 per ounce, following a

more than 1% jump in the previous session that brought it close

to last month's record high at $2,685.42, as a flight to the

safe-haven dollar constrained the precious metal's gains.

Benchmark 10-year Treasury yields ticked up

about 4 basis points (bp) to 3.7467%.

The dollar index, which tracks the U.S. currency

versus the euro and five other major rivals, was steady at

101.25 after pushing as high as 101.39 on Tuesday for the first

time since Sept. 19.

Europe's shared currency was little changed at $1.1061

following a 0.6% drop in the previous session, when it dipped to

$1.1046 for the first time since Sept. 12.

Euro area data on Tuesday showed inflation fell below the

ECB's 2% target last month, bolstering bets for a quarter-point

rate cut on Oct. 17.

Meanwhile, U.S. figures overnight showed a solid economy, a

day after Fed Chair Jerome Powell pushed back against the

likelihood of another 50 basis point rate cut when the U.S.

central bank meets next month.

Job openings unexpectedly increased in August after two

straight monthly decreases, but hiring was soft and consistent

with a slowing labour market.

Private payrolls data is due later on Wednesday, ahead of

potentially crucial monthly non-farm payrolls numbers on Friday.

A crippling U.S. dock strike, that could cost the economy $5

billion each day, will also be at the front of investor minds,

with hopes for a quick end dashed by a lack of active

negotiation overnight.