GLOBAL MARKETS-Gold surges on Mideast risk but stocks pare losses

(Adds gold, oil settlement prices)
* Gold hits almost 7-year high on safe-haven demand
* MSCI world index pares losses, U.S. stocks rebound
* Investors assess risk, turn less risk-adverse
* Dollar eases against Swiss franc

By Herbert Lash
NEW YORK, Jan 6 (Reuters) - Gold prices shot to almost
seven-year highs on Monday as a spike in U.S.-Iranian tensions
spurred demand for safe-haven assets and pushed a gauge of
global equity markets lower, but shares on Wall Street rebounded
on a less worrisome view of events.
Oil rose and the dollar weakened after the U.S. killing last
week of General Qassem Soleimani, the architect of Iran's drive
to extend its influence across the Middle East. The death raised
concerns around the world that a regional conflict could erupt.
Iran's supreme leader wept in grief with thousands of
mourners thronging Tehran's streets for Soleimani's funeral, and
the slain military commander's successor vowed to expel U.S.
forces from the region in revenge.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.19%, while European shares extended losses. The pan-European
STOXX 600 index .STOXX lost 0.41%.
On Wall Street, the benchmark S&P 500 and Nasdaq turned
positive after early declines, a sign investors were taking a
cautious approach to the potential for rising hostilities.
The market should be jittery but the recovery from the 9/11
attacks in 2001 and the financial crisis a decade ago have made
it easier to take lesser events in stride, said David Kelly,
chief global strategist at JPMorgan Asset Management.
"This is a case that the market is probably under-reacting
to a threat because we don't know what the Iranians may do to
retaliate, and we don't know how the U.S. administration may
respond," he said.
However, it is important not to get lulled into complacency
because there is some additional risk in the equity market after
Soleimani's death and high stock valuations, Kelly noted.
"In the past if you have a big increase in uncertainty, the
market sells off first and asks questions later. We're in a
different situation now," he said.
The Dow Jones Industrial Average .DJI fell 0.93 points, or
-0%, to 28,633.95. The S&P 500 .SPX gained 5.46 points, or
0.17%, to 3,240.31 and the Nasdaq Composite .IXIC added 30.48
points, or 0.34%, to 9,051.25.
Emerging market stocks lost 1.03%, while earlier in Asia,
China's blue-chip CSI300 index .CSI300 ended 0.4% lower and
Tokyo's Nikkei average .N225 fell 1.91% to a one-month low.
Adding to tensions, Iran said it was taking another step
back from its commitments under a 2015 nuclear deal with six
powers that Washington withdrew from in 2018.
Spot gold XAU= hit $1,582.59 an ounce, its highest since
April 2013, but the precious metal later pared some gains.
U.S. gold futures GCcv1 settled 1.2% higher at $1,568.80.
The Swiss franc rose against the dollar on worries about a
broader escalation of Mideast conflict and the safe-haven
Japanese yen surged to a three-month high before weakening
against the greenback. Edward Moya, senior market analyst at OANDA in New York,
said the market is still digesting the implications.
"We're having a little softness in the dollar against
safe-haven currencies, but I think risk appetite will return. If
Iran does retaliate, they know they're toast," Moya said.
The dollar index .DXY fell 0.16%, with the euro EUR= up
0.29% to $1.119.
The yen JPM= weakened 0.34% versus the greenback at 108.45
per dollar, while the dollar fell 0.28% to 0.9701 franc CHF= .
The Treasury yield curve was flatter as the heightened
U.S.-Iranian tensions boosted demand for safe-haven assets.
The yield on the benchmark 10-year U.S. Treasury note has
fallen more than 5.0% since the close on Jan. 2, just before an
overnight U.S. air strike in Baghdad killed Soleimani.
The 10-year U.S. Treasury note US10YT=RR fell 7/32 in
price to yield 1.8125%.
The yield on Germany's 10-year bond dropped to its lowest in
over three weeks. The bond, a safe-haven that usually gains
during global uncertainty or risk, briefly fell to -0.31%
DE10YT=RR . Yields later pulled back to -0.292%, flat on the day.
Oil prices jumped, pushing Brent above $70 a barrel, as
rhetoric from the United States, Iran and Iraq fanned tensions
in the Middle East. Brent crude futures LCOc1 jumped more than 3% to a high of
$70.74 a barrel at one point but pared gains to settle up 31
cents at $68.91.
U.S. West Texas Intermediate CLc1 crude gained 22 cents to
settle at $63.27 a barrel.