GLOBAL MARKETS-Oil, safe havens surge as U.S. strikes kill Iranian commander

* Oil up over $2 a barrel as U.S. attack kills Iranian

commander

* Scramble for safety boosts yen, Swiss franc, Bunds, gold

* European shares and U.S. futures down 0.5%

By Marc Jones

LONDON, Jan 3 (Reuters) - Oil prices rose over $2 a barrel

and gold and other safe-haven assets jumped on Friday, as the

U.S. killing of a top Iranian commander in an air strike in Iraq

ratcheted up tensions between the two powers.

Traders were clearly spooked. The death of Iranian

Major-General Qassem Soleimani, head of the elite Quds Force,

prompted Iranian Supreme Leader Ayatollah Ali Khamenei to vow

revenge.

Europe's stock markets fell 0.5% in early trading as hopes

for a lengthy New Year rally vanished. Safe havens gained, with

Japan's yen JPY= rising half a percent to the dollar to a

two-month high and the Swiss franc hitting its highest against

the euro since September. EURCHF= /FRX

The Middle East-focused oil markets saw the most dramatic

moves. Brent crude futures jumped nearly $3 to $69.16 a barrel

-- also the highest since September -- before easing back to

$68.42. O/R

"We are only into the third day of the new year, and a big

fat dollop of geopolitical uncertainty has landed on investors'

desks," said Jeffrey Halley, senior market analyst for Asia

Pacific at broker OANDA.

"I am struggling to see how an Iranian riposte will not

occur," he said. "Oil installations and tankers were my first

thoughts."

Soleimani's Quds Force and its paramilitary proxies, ranging

from Lebanon's Hezbollah to the PMF in Iraq, have ample means to

mount a multi-pronged response.

In September, U.S. officials blamed Iran for a missile and

drone attack on oil installations of Saudi Aramco (SE:2222), the Saudi

state energy giant and world's largest oil exporter. The Trump

administration did not respond, beyond heated rhetoric and

threats.

SCRAMBLE TO SAFETY

German Bunds and U.S. Treasuries -- the world's benchmark

government bonds -- caught a bid, too. Ten-year German yields,

which move inversely to prices, fell further away from

seven-month highs touched earlier in the week. U.S. 10-year

yields fell 5 basis points to a three-week low.

The focus on geopolitics meant markets paid little attention

to stronger-than-expected data from France, where inflation rose

1.6% year-on-year in December, beating analyst expectations for

a 1.4% rise.

"Markets still remain quite thin after the holidays, but

even in a regular session we would have seen a similar

reaction," said Christian Lenk, a rates strategist at DZ Bank in

Frankfurt. "The repercussions from the air strike are not

clearly forecastable and tensions remain high in the region."

The air strikes in Iraq also killed top Iraqi militia

commander Abu Mahdi al-Muhandis. They came after U.S. Defense

Secretary Mark Esper said on Thursday there were indications

Iran or forces it backed might be planning additional attacks,

after Iranian-backed demonstrators stormed the U.S. embassy in

Baghdad. Gold, a traditional refuge for risk-averse investors, rose

1% to a four-month high of $1,543.66. For the week, it has

gained about 2%, heading for a fourth consecutive weekly

increase. GOL/

"After the recent escalations in geopolitical issues, we see

a resistance level near the $1,575 level for the next week,"

said Jigar Trivedi, a commodities analyst at Anand Rathi Shares

& Stock Brokers in Mumbai.