* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Gold hits 7-year high
* Oil hits highest since September
* MSCI All-Country World Index wipes out 2020 gains
By Ritvik Carvalho
LONDON, Jan 6 (Reuters) - Tensions in the Middle East after
the killing of a top Iranian general by the United States erased
new year gains for a gauge of world shares on Monday as
investors pushed safe-haven gold to a seven-year high, and oil
jumped to its highest since September.
The United States detected a heightened state of alert by
Iran's missile forces, as President Donald Trump warned the U.S.
would strike back, "perhaps in a disproportionate manner", if
Iran attacked any American person or target. Iraq's parliament on Sunday recommended all foreign troops
be ordered out of the country after the U.S. killing of the
Iranian military commander and an Iraqi militia leader in a
drone strike on a convoy at Baghdad airport.
Spot gold XAU= gained 1.6% to $1,579.72 per ounce in
jittery trade to reach its highest since April 2013. GOL/
Oil prices extended gains on fears any Middle East conflict
could disrupt global supplies. O/R
Brent crude LCOc1 futures rose 2.04% to $70 a barrel,
while U.S. crude CLc1 climbed 1.7% to $64.12.
European shares extended losses and were set for their worst
day in a week, with the pan-European STOXX 600 index down 1.12%
by 0838 GMT. The European oil and gas stock index .SXEP rose
about 0.74% and was the sole gainer among its peers, hitting its
highest since July. .EU
"Geopolitical events by their nature are unpredictable, but
previous periods of increased tensions suggest that the impact
on wider markets tends to be short-lived, with more lasting
effects confined to local markets," said Mark Haefele, chief
investment officer at UBS Global Wealth Management.
"In general, this supports holding a diversified portfolio."
BIGGEST FALL
MSCI's All-Country World Index .MIWD00000PUS , which tracks
shares in 47 countries, was down 0.43%, erasing all its new year
gains in its biggest two-day fall since early December.
In Asia, Japan's Nikkei .N225 slid almost 2% in a sour
return from holiday, while E-Mini futures for the S&P 500 ESc1
fell 0.7%. .N
Chinese shares, which had opened in the red, reversed their
losses, as did Australian shares which ended the day flat. Hong
Kong's Hang Seng index .HSI lost 0.8%.
Sovereign bonds benefited from the safety bid with yields on
10-year Treasuries US10YT=RR down at 1.7725% having fallen 10
basis points on Friday.
The yen remained the favoured safe haven among currencies
thanks to Japan's massive holdings of foreign assets. Investors
assume Japanese funds would repatriate their money during a true
global crisis, pushing the yen higher.
"Iran is almost certainly to respond in some scale, scope
and magnitude," said Lee Hardman, currency analyst at MUFG.
Therefore "market participants are likely to remain nervous
until there is more clarity over how geopolitical tensions
between the U.S. and Iran will proceed", Hardman said, noting
that geopolitical tensions could hurt global economic growth,
especially if the price of oil increases.
On Monday, the dollar was last at 107.965 yen JPY= , after
falling to a three-month trough of 107.77 earlier in the
session. The euro likewise eased to 120.61 yen EURJPY= having
hit a three-week low.
The dollar was steadier against other majors, with the euro
a tad firmer at $1.1172 EUR= . Against a basket of currencies,
the dollar was holding at 96.839 .DXY .
The risk sensitive currencies of Australia AUD=D3 and New
Zealand NZD=D3 were on track for their fourth straight session
of losses. AUD/