By Sinéad Carew and Yoruk Bahceli

(Reuters) – MSCI’s global equities index was lower on Tuesday while the dollar rose and Treasury yields fell while oil futures rallied as investors reacted to the escalating Middle East conflict with fears that Iran was planning an attack on Israel.

A senior White House official said on Tuesday that the United States has indications that Iran is preparing to imminently launch a ballistic missile attack against Israel.

This was after Israel carried out two attacks on Beirut, striking the southern suburbs of the Lebanese capital and the city’s southern entrance, according to two security sources.

“The situation in the Middle East continues to evolve rapidly. With Iran and Lebanon being drawn into the Middle East conflict more directly, reactions today are playing out in higher crude and gold prices,” Anthony Saglimbene, chief market strategist, Ameriprise Financial.

“While rising geopolitical tensions create elevated market uncertainty and anxiety over the near term, investors will likely measure the longer-term impact of growing Middle East conflict through potential impacts on oil supply.”

Oil prices climbed sharply after the reports with U.S. crude up 3.7% at $70.69 a barrel and Brent rising to $74.22 per barrel, up 3.47% on the day.

Saglimbene noted that investors were also monitoring a strike at U.S. East Coast and Gulf Coast ports, which is expected to halt about half the nation’s ocean shipping.

Dockworkers called a strike after a midnight deadline passed with no sign of a new contract deal with port owners.

On Wall Street at 11:04 a.m. the Dow Jones Industrial Average fell 262.25 points, or 0.62%, to 42,068.06, the S&P 500 fell 63.70 points, or 1.11%, to 5,698.64 and the Nasdaq Composite fell 324.99 points, or 1.78%, to 17,865.17.

MSCI’s gauge of stocks across the globe fell 7.36 points, or 0.86%, to 844.42. In Europe, the STOXX 600 index fell 0.4%.

In foreign exchange markets, the Japanese yen and Swiss franc, seen as safe haven currencies, both gained ground after the reports about Iran. The dollar index was rising after Federal Reserve Chair Jerome Powell pushed back on Monday against bets on more supersized interest rate cuts.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.46% to 101.21.

The euro was down 0.57% at $1.1071 while against the Japanese yen, the dollar strengthened 0.08% to 143.73.

In Treasuries, the yield on benchmark U.S. 10-year notes fell 8.4 basis points to 3.718%, from 3.802% late on Monday. The 30-year bond yield fell 7.4 basis points to 4.0592% from 4.133%.

The 2-year note yield, which typically moves in step with interest rate expectations, fell 5.1 basis points to 3.6002%, from 3.651% late on Monday.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 11.5 basis points.

Overseas, euro zone inflation data helped bonds rally there as it came in below the ECB’s 2% target, boosting the case for speedier rate cuts than traders have been betting on.

Precious metals, often seen as a safe haven asset, were in demand on Tuesday.

Spot gold rose 0.94% to $2,659.25 an ounce. U.S. gold futures rose 0.95% to $2,661.20 an ounce.

(Reporting by Sinéad Carew, Yoruk Bahceli and Ankur Banerjee; Editing by Emelia Sithole-Matarise, Mark Potter and David Evans)

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