GLOBAL MARKETS-Asian stocks rally as Mideast tensions ease, oil retreats

* Safety rush turns to relief rally as Mideast tension ebbs

* Oil drops, stocks rise

* Gold and yen give back gains

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Tom Westbrook

SINGAPORE, Jan 9 (Reuters) - Asian stocks rebounded on

Thursday and oil beat a retreat, as the United States and Iran

backed away from the brink of further conflict in the Middle

East and investors reversed their safety plays.

U.S. President Donald Trump responded overnight to an

Iranian attack on U.S. forces with sanctions, not violence. Iran

offered no immediate signal it would retaliate further to a Jan.

3 U.S. strike that killed one of its senior military commanders.

Japan's Nikkei .N225 opened 1.6% higher, putting stocks

back where they were on Tuesday. MSCI's broadest index of

Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.1%,

following gains on Wall Street overnight. .N

Australian shares .AXJO added a percentage point, climbing

to their highest mark for the year so far and sitting close to a

record high hit in December.

"I think today is a bit of a relief rally," said Shane

Oliver, Chief Economist at AMP Capital in Sydney.

"Yesterday, investors were fearing the worst, that this was

the escalation now underway. The news overnight has been more

along the lines that Iran pulled its punches and Trump is toning

things down," he said. "Which is seen by investors as

substantially reducing the risk of a war."

Investors quit the safe-haven Japanese yen JPY= , sending

it sliding from a three-month high to a two-week low. FRX/

Oil now sits cheaper than it was before the killing of the

Iranian commander, Qassem Soleimani, in Baghdad, a strike that

raised fears of an escalating regional conflict. O/R

Brent futures LCOc1 nursed overnight losses of 4% to sit

at $65.44 per barrel, near the cheapest since mid-December.

Gold XAU= gave back sharp gains made on Wednesday but

remains dearer than before Soleimani's death in an indication

that investors' fears have not completely evaporated. GOL/

It last traded steady at $1,556.98 per ounce.

SANCTIONS NOT STRIKES

Iran fired missiles at military bases housing U.S. troops in

Iraq on Wednesday in response Soleimani's killing. But Trump

said no Americans were hurt and made no direct threats of a

military response in an address to the nation on Wednesday.

"Iran appears to be standing down, which is a good thing for

all parties concerned and a very good thing for the world," he

said. He announced economic sanctions on Iran without giving

details.

Iranian Foreign Minister Mohammad Javad Zarif had earlier

said the strikes "concluded" Tehran's response to the killing of

Soleimani.

On Wall Street stocks rose, led by the Nasdaq .IXIC which

added 0.67%, while the Dow Jones Industrial Average .DJI and

the S&P 500 .SPX each rose roughly half a percentage point.

U.S. Treasuries, which had soared in the flight to safety a

day ago also settled back, with yields on the benchmark 10-year

U.S. Treasury note US10YT=RR at 1.8633%, after dropping as low

as 1.705%.

The yen, which at one point on Wednesday traded at 107.63

per dollar, was at 109.19 and drifting weaker in early Asian

trade.