* MSCI Asia ex-Japan off 0.5%
* Iran launches missile attacks on Iraqi bases housing U.S.
forces
* U.S. crude futures, gold soar amid fears of further
escalation
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Andrew Galbraith
SHANGHAI, Jan 8 (Reuters) - Asian shares and U.S. treasury
yields plunged on Wednesday, while gold and oil shot higher
after Iran fired rockets at an Iraqi airbase that hosts U.S.
military forces, stoking fears of further sharp escalations in a
developing conflict.
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 raised fears of a wider war in the Middle East.
In morning trade, MSCI's broadest index of Asia-Pacific
shares outside Japan .MIAPJ0000PUS shed 0.5%. Japan's Nikkei
.N225 dropped 2.5% and Australian shares .AXJO fell 1%.
U.S. crude CLc1 soared 4.42% to $65.47 a barrel.
"We've moved on from how Iran will respond to now
anticipating the U.S. 52-pronged response as the U.S. military
forces in the region are in a heightened state of alert while
likely preparing for war," said Stephen Innes, strategist at
AxiTrader. "It's not going to be pretty today"
The sharp sell-off in risk assets was accompanied by steep
drops in U.S. Treasury yields as investors flocked to safety.
Benchmark 10-year Treasury notes US10YT=RR yielded 1.7188%,
down more than 10 basis points from a U.S. close of 1.825% on
Tuesday.
The two-year yield US2YT=RR dropped to 1.4581% compared
with a U.S. close of 1.546%.
The dollar also plunged against the yen, with the Japanese
currency touching its strongest point against the greenback
since October. The U.S. currency was last down 0.69% against the
yen at 107.67 JPY= .
The euro EUR= gained 0.1% on the day to $1.1161 .DXY .
The flight to safety and a falling dollar supported gold,
which rocked 1.91% higher on the spot market XAU= to $1,603.93
per ounce. GOL/