GLOBAL MARKETS-Stocks tumble, gold and crude soar after Iran strike on U.S. forces

* MSCI Asia ex-Japan falls 1%
* Iran launches missile attacks on Iraqi bases housing U.S.
forces
* Crude futures, gold soar amid fears of further escalation
* U.S. Treasury yields fall amid flight to safety
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Andrew Galbraith
SHANGHAI, Jan 8 (Reuters) - Asian shares and U.S. treasury
yields tumbled on Wednesday, while the yen, gold and oil shot
higher after Iran fired rockets at Iraqi airbases hosting U.S.
military forces, stoking fears of a wider conflict in the Middle
East.
Iran's missile attacks on the Ain Al-Asad air base and
another in Erbil, Iraq, early Wednesday came hours after the
funeral of an Iranian commander whose killing in a U.S. drone
strike has intensified tensions in the region. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was 1% lower shortly after China's share markets
began trading, with China's blue-chip CSI300 index .CSI300
down 0.56%.
Japan's Nikkei .N225 tumbled 2.2% and Australian shares
.AXJO fell more than 1%. U.S. stock futures were also sharply
lower, with S&P500 e-minis ESc1 off nearly 1%.
"It's a very classic risk off," said Rob Carnell,
Asia-Pacific chief economist at ING in Singapore.
"This is the Iranian response to the killing of Soleimani.
We now have to see what the U.S. response to the Iranian
response is. This looks as if it could escalate," he said.
"If you see U.S. treasuries rallying a bit this morning,
expect them to rally quite a bit further should there be a
forceful response from the United States, which I'd imagine
there would be...from a market perspective I think this one
could run and run."
The yield on benchmark 10-year U.S. Treasury notes
US10YT=RR last stood at 1.7534%, down more than 7 basis points
from a U.S. close of 1.825% on Tuesday, though up from session
lows. U.S. 10-year Treasury futures TYc1 had earlier peaked at
their highest level since November, and were last up 0.63%.
The two-year yield US2YT=RR dropped to 1.4982% compared
with a U.S. close of 1.546%.
The dollar slipped against the yen, with the Japanese
currency touching its strongest point against the greenback
since October. The U.S. currency was last down 0.28% against the
yen at 108.11 JPY= .
The euro EUR= was relatively unmoved on the day, rising
0.04% to buy $1.1155. The dollar index .DXY , which measures
the greenback against six major peers, was 0.19% lower at
96.819.
In commodity markets, global benchmark Brent crude futures
LCOc1 shot back above $70 per dollar to their highest level
since mid-September, and were last up 3.59% at $70.72 per
barrel. U.S. crude CLc1 soared 3.46% to $64.87 a barrel.
The flight to safety and a falling dollar supported gold,
which rocketed 1.80% on the spot market XAU= to $1,602.39 per
ounce. GOL/
"You can pretty much get the sentiment from gold. It is
holding above $1,600, if there is confirmation that there are
U.S. casualties, it could go higher," said Matt Simpson, a
senior market analyst at Gain Capital in Singapore.
"If it does look like we've got U.S. casualties, then I
don't think Trump is going to just stand back and take that," he
said. "World War III has been thrown around. I don't think we're
there yet. But it does look like Iraq II."
Reports of the attack threw the market off balance after
better-than-expected data in the U.S. non-manufacturing sector
helped to lift the dollar overnight. Markets in Asia had bounced
on Tuesday amid easing anxiety over the possibility for further
escalation in the Middle East.