GLOBAL MARKETS-Brent oil climbs, as European stocks, Wall Street index gain

By Chris Prentice and Iain Withers

NEW YORK/LONDON, March 30 (Reuters) - Benchmark oil prices extended gains on Monday, as a major Wall Street index and European shares advanced in choppy trade and investors focused on a Gulf conflict that they fear will drive inflation and raise the risk of recession across the globe.

U.S. Treasury prices rose, with yields declining across the curve as mounting global growth concerns eclipsed inflation worries. Investors have grown increasingly uneasy about a war entering its fifth week with no clear path to resolution. US/

Trump said the U.S. was in serious discussions with a "more reasonable regime" to end the war that has widened since it began a month ago with U.S. and Israeli attacks on Iran.

But he repeated his warning to Iran to open the Strait of Hormuz or risk U.S. attacks on Iranian oil wells and power plants.

Federal Reserve Chair Jerome Powell said the U.S. central bank can wait to see how the Iran war affects the economy and inflation, noting that policymakers typically look through shocks such as those from higher oil prices.

Data showed that inflation in Germany, the euro zone's largest economy, gathered pace in March due to surging energy prices. Economists see further increases ahead.

CRUDE PRICES KEEP RISING

Brent crude futures LCOc1 rose to $113.17 per barrel, up 0.53% on the day, as U.S. crude CLc1 surged 3.41% to $103.04.

On Wall Street, the Dow Jones Industrial Average .DJI rose 0.34% to 45,322.44. The S&P 500 .SPX retreated 0.21% to 6,354.87 and the Nasdaq Composite .IXIC fell 0.55% to 20,832.24.

After a weak open, the pan-European STOXX 600 .STOXX rose and Europe's broad FTSEurofirst 300 index .FTEU3 also advanced.

Pakistan said it was preparing to host "meaningful talks" to end the conflict in the coming days, even though Tehran accused Washington of preparing a land assault as it builds up forces in the region.

“Oil is the lightning rod right now,” said Eren Osman, managing director of wealth management at Arbuthnot Latham, adding that a reopening of the Strait of Hormuz was the key to calming world markets.

“The biggest challenge for us as investors today is that you’ve got one of the widest ranges of potential outcomes,” he said, adding he did not expect a prolonged conflict as he believed Trump had a "pain threshold" for market losses.

Madison Cartwright, senior geo-economics analyst at Commonwealth Bank of Australia, said Iran's control of the Strait of Hormuz, conduit for about a fifth of the world's oil and liquefied natural gas, nonetheless gave it little incentive to concede, and that the bank expected the war to run until at least June.

The clampdown on the Strait has sent prices for oil, gas, fertiliser, plastic and aluminium surging, along with fuel for planes and shipping. Prices for food, pharmaceuticals and petrochemical products are all set to rise.

Aluminium prices surged near four-year highs after Iranian airstrikes on two major Middle Eastern producers over the weekend. MET/L

That is particularly bad news for Asia. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed lower by 1.96% and Japan's Nikkei .N225 fell 2.79%.

"A scenario in which the Strait remains closed for an additional month would be consistent with oil prices rising towards $150 a barrel and constraints on industrial consumers of energy supply," said Bruce Kasman, global head of economics at JPMorgan.

FED IN FOCUS AS PAYROLLS LOOM

Data on U.S. retail sales, manufacturing and payrolls this week will provide an update on how the economy is faring.

The energy shock, combined with pressure on fiscal budgets from higher borrowing costs and the need for more defence spending, has hit sovereign bond markets.

The yield on benchmark U.S. 10-year notes US10YT=RR fell 9.4 basis points to 4.346%. The 2-year note US2YT=RR yield, which typically moves in step with Fed interest rate expectations, fell 8.4 basis points to 3.832%.

Heightened volatility in markets has tended to benefit the U.S. dollar 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 dollar index =USD, which measures the dollar against a basket of currencies including the yen and the euro, rose 0.15% to 100.46.

Yet after more warnings of possible intervention from the Japanese authorities, the yen strengthened 0.48% to 159.54 against the dollar.

Spot gold XAU= rose 0.56% to $4,517.54 an ounce, and futures GCcv1 settled 0.7% higher at $4,557.50. GOL/