Updates to mid-morning Asia

By Rae Wee

SINGAPORE, March 24 (Reuters) - Stocks were on tenterhooks and oil prices rose in choppy trade on Tuesday as U.S. President Donald Trump's postponement of the bombing of Iran's power grid proved no panacea for investors worried about the ramifications of the Middle East war.

U.S. Treasury yields pushed higher and the dollar regained lost ground, in a retracement of the relief rally that swept markets overnight after Trump added five days to his Saturday ultimatum for Iran to reopen the Strait of Hormuz within 48 hours, citing "productive" talks Tehran.

Much uncertainty remained as the world continues to grapple with an energy shock while Iran denied that it had engaged in negotiations with the U.S.

"The underlying situation is still incredibly fragile or flammable," said IG market analyst Tony Sycamore.

"It doesn't seem like all of the parties are on the same page... Trump can talk all he likes, but the Strait (of Hormuz) is closed and it's staying closed until all the Iranians get on the same page, and that's where we've got a problem."

Asia shares were up on Tuesday in a catch-up rally to global counterparts. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1%, while Tokyo's Nikkei .N225 advanced 0.8%. Hong Kong's Hang Seng Index .HSI added 1.4%.

But U.S. futures turned lower after Wall Street ended higher in the overnight cash session. Nasdaq futures NQc1 were down 0.6%, while S&P 500 futures ESc1 lost 0.5%.

EUROSTOXX 50 futures STXEc1 similarly slid 0.9% and FTSE futures FFIc1 edged 0.8% lower.

In commodities, Brent crude futures LCOc1 were up 4.2% to $104.21 a barrel, reversing some of their 10% slide from Monday, while U.S. crude CLc1 rose 4.3% to $91.93 per barrel.

While two tankers bound for India sailed through the Strait of Hormuz on Monday, the war continues to disrupt traffic through the waterway, which has halted shipments of about one-fifth of the world's oil and liquefied natural gas.

"The war has resulted in lasting damage to infrastructure, so even if it's over soon energy prices may well remain higher - and bond and equity prices lower - for longer than they otherwise would have been," said Thomas Mathews, head of markets for Asia-Pacific at Capital Economics.

YIELDS RISE, DOLLAR GETS ITS MOJO BACK

U.S. Treasury yields rose on Tuesday after a sharp fall overnight, as little clarity over an end to the conflict left traders pricing in a more hawkish global interest rate outlook.

The two-year yield US2YT=RR jumped 8 basis points to 3.9136% in Asia, while the benchmark 10-year yield US10YT=RR was up more than 4 bps.

The inflationary pulse from energy has seen investors abandon hope for further monetary easing globally and swing to pricing in rate hikes across most developed nations.

The U.S. Federal Reserve 0#USDIRPR is seen leaving rates on hold this year, with futures pointing to a small chance of a hike, while the Bank of England 0#GBPIRPR and European Central Bank 0#EURIRPR are widely expected to raise rates.

"Unless the Strait (of Hormuz) is reopened very quickly, we are still more likely than not to see higher interest rates and a meaningful increase in oil importers' costs in the coming weeks," said Kit Juckes, head of FX strategy at Societe Generale.

The U.S. dollar meanwhile rebounded from its fall on Monday, pushing the euro EUR= down 0.27% to $1.1585, while sterling GBP= slid 0.45% to $1.3394.

Against the yen JPY=, the dollar was up 0.14% at 158.63.

Data on Tuesday showed Japan's core consumer inflation rate hit 1.6% in February to slide below the Bank of Japan's 2% target for the first time in nearly four years, complicating the bank's efforts to justify further interest rate hikes.

Elsewhere, spot gold XAU= was down 1% at $4,364.09 an ounce. GOL/

(Reporting by Rae Wee; Editing by Christopher Cushing)

((Rae.Wee@thomsonreuters.com;))