Updates prices to U.S. early afternoon trading

By Sinéad Carew and Marc Jones

NEW YORK/LONDON, March 5 (Reuters) - Equities fell on Wall Street and in Europe on Thursday and government bonds sold off, while the dollar climbed, as oil prices jumped on supply fears amid intensifying fighting on the sixth day of the U.S.-Israeli war with Iran.

The campaign against Iran continued with what residents described as even heavier bombing, while Tehran launched a wave of missiles at Israel and vowed to retaliate against Americans "wherever they are" after a U.S. strike on a ship far from the battle zone. In Washington, Republican Senators on Wednesday blocked a bipartisan move to halt the U.S. air assault.

More tankers came under attack in Gulf waters on Thursday as the conflict escalated, and Iranian drones entered Azerbaijan, raising the risk of the crisis spilling into other oil-producing states. A Bahamas-flagged crude tanker was targeted by an Iranian remote-controlled boat laden with explosives while anchored near Iraq's Khor al Zubair port, according to initial assessments. A second tanker at anchor off Kuwait was taking on water and spilling oil after a large explosion on its port side.

"Today there's more hesitancy because of concerns around the potential for the price of oil to get a lot higher. There's a lot of attention being given to the bottleneck that is occurring in the Strait of Hormuz," said Kristina Hooper, chief market strategist at Man Group.

And while traders have been reacting to the latest headlines from the Middle East, Hooper described the market's current "attention span is that of a gnat." As such, she warned of potential volatility after Friday's U.S. non-farm payrolls report, with investor concerns rising over labor-market risks from artificial intelligence developments.

"You could see an economic data point change the mood quickly. There's the potential we see that tomorrow with the jobs report," she said.

For now, on Wall Street at 12:09 p.m. ET (1707 GMT) the Dow Jones Industrial Average .DJI fell 776.22 points, or 1.59%, to 47,963.19, the S&P 500 .SPX fell 40.94 points, or 0.60%, to 6,828.56 and the Nasdaq Composite .IXIC fell 47.41 points, or 0.21%, to 22,760.07.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 4.04 points, or 0.39%, to 1,027.55.

The pan-European STOXX 600 .STOXX index fell 1.29%. This was after MSCI's Asia Pacific price index .MIAP00000PUS rose 2%. South Korea's KOSPI index .KS11 closed up almost 10%. The index, which has been under pressure due to the country's dependence on imported oil, erased most of Wednesday's record drop, after President Lee Jae Myung ordered activation of a $68 billion market stabilisation fund. Japan's Nikkei .N225 jumped nearly 2%, while Chinese shares climbed almost 1% after Beijing unveiled a 4.5%-5% annual economic growth target. .T.SS

In currencies, the dollar rebounded from a brief pullback on Wednesday as investors sought safe-haven assets.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.44% to 99.24.

The euro EUR= was down 0.45% at $1.1581 while, against the Japanese yen JPY=, the dollar strengthened 0.36% to 157.59.

In cryptocurrencies, bitcoin BTC= fell 2.91% to $71,209.57. Ethereum ETH= declined 3.33% to $2,079.12.

In bonds, U.S. Treasury yields rose for a fourth straight day on worries that higher oil prices could push up inflation and affect Federal Reserve policy.

The yield on benchmark U.S. 10-year notes US10YT=RR rose 5.6 basis points to 4.138%, from 4.082% late on Wednesday while the 30-year bond US30YT=RR yield rose 3.5 basis points to 4.7518%.

The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Fed, rose 4.8 basis points to 3.589%, from 3.543%.

Oil prices surged as the war disrupted supplies and shipping, prompting some major Middle Eastern producers to cut output. Around 300 oil tankers remained inside the Strait of Hormuz, with traffic largely halted since the weekend, according to ship tracking data from Vortexa and Kpler that excludes some of the smallest tankers.

U.S. crude CLc1 rose 6.44% to $79.47 a barrel and Brent LCOc1 rose to $84.50 per barrel, up 3.81% on the day.

Elsewhere in commodities, gold prices were reversing Wednesday's gains on higher Treasury yields and the firmer dollar. Spot gold XAU= fell 0.98% to $5,085.79 an ounce. U.S. gold futures GCc1 fell 1.25% to $5,056.30 an ounce.

(Additional reporting by Rocky Swift. Editing by Alexandra Hudson, Nivedita Bhattacharjee and Mark Potter)

((rocky.swift@thomsonreuters.com;))