Oil report

GLOBAL MARKETS-Gold surges as investors assess Mideast risk; stocks fall

(Adds U.S. market open, byline, changes dateline; previous LONDON)

* Gold hits almost 7-year high on safe-haven demand

* Dollar eases against Swiss franc, Japanese yen

* Global stock indexes fall, but Nasdaq turns positive

* Oil hits highest since September

NEW YORK, Jan 6 (Reuters) - Gold prices shot to almost seven-year highs on Monday while yields on U.S. Treasury and euro zone government debt fell as escalating U.S.-Iranian tensions spurred demand for safe-haven assets.

A gauge of global equity markets fell.

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, raised concerns around the globe that a broader 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 shed 0.31%, while European shares extended losses. The pan-European STOXX 600 index lost 0.45%.

On Wall Street, the Nasdaq turned positive, a sign investors were taking a cautious approach.

Investors have withstood the recovery from the 9/11 attacks in 2001 and the financial crisis a decade ago, making it easier to take in stride lesser events, 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 rather 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.

Dow Jones Industrial Average fell 57.09 points, or 0.2%, to 28,577.79. The S&P 500 lost 1.18 points, or 0.04%, to 3,233.67 and the Nasdaq Composite added 14.77 points, or 0.16%, to 9,035.54.

Emerging market stocks lost 0.99%, while earlier in Asia, China’s blue-chip CSI300 index ended 0.4% lower and Tokyo’s Nikkei average fell 1.91% to a one-month low.

Adding to tensions, Iran also 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 rose 2% to $1,582.59 an ounce as of 13:20 GMT, putting it on course for its biggest one-day jump in more than four months.

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 fell 0.15%, with the euro up 0.25% to $1.1186.

The yen weakened 0.30% versus the greenback at 108.41 per dollar, while the dollar fell 0.28% to 0.9701 franc.

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 about 5.36% 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 fell 5/32 in price to yield 1.8055%.

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% .

Yields later pulled back to -0.292%, flat on the day.

Oil prices jumped by about 1% on Monday, pushing Brent above $70 a barrel, as rhetoric from the United States, Iran and Iraq fanned tensions in the Middle East.

Brent crude futures soared to a high of $70.74 a barrel and later were at $69.91, up 31 cents from Friday’s settlement.

U.S. West Texas Intermediate crude was up 1 cent at $63.06 a barrel.

Reporting by Herbert Lash; Editing by Dan Grebler