Sawt Falasteen - Global equities extend selloff on Iran-Israel conflict fears

Frankfurt, London and Paris shed more than one percent, but oil prices dipped despite jitters over output from key crude producer Iran.

Hong Kong and Tokyo stocks lost about two percent while Shanghai shed more than one percent amid mixed Chinese data.

Wall Street had tanked Monday partly in response to forecast-beating US retail sales data that reinforced the view that the world's top economy remained in rude health and further dampened hopes for US rate reductions this year.

Markets remain fearful the Iran-Israel crisis could spill over into a broader war in the Middle East.

- 'Heightened tensions' -

"Sentiment is shaky at best right now with heightened geopolitical tensions in the Middle East, coming alongside increased concerns that the Federal Reserve may opt to maintain interest rates at the current levels for some time yet," noted analyst Joshua Mahony at Scope Markets.

Tehran fired hundreds of missiles and drones at Israel late on Saturday, saying the attack was retaliation for an April 1 strike on the consular annex of its Damascus embassy that killed seven Revolutionary Guards including two generals.

While air defence systems destroyed the vast majority of the barrage and Iran said "the matter can be deemed concluded", Israel's army chief General Herzi Halevi warned that there will be a response, fuelling worries of a dangerous escalation.

"The key for markets will now be the extent of the retaliation," said Matthew Ryan, head of market strategy at financial services firm Ebury.

"Should Israel follow up with similarly ambitious missile attacks or, under a worse-case scenario, other nations become embroiled in the conflict, notably the US, then we would likely see a flight to safety in markets.

"The threat to global oil supply would also likely trigger a sharp move upwards in oil prices, which could comfortably jump above $100 a barrel should investors fear a wider regional war."

Oil however pulled lower Tuesday after sliding the previous day on hopes for a de-escalation.

- China's mixed data -

Back in Asia, traders digested figures showing Chinese expansion easily beat expectations in the first three months of the year but retail and industrial data came in well below par, suggesting leaders have much work to do to kickstart growth.

Investors appeared to ignore figures showing China's economy grew 5.3 percent in the first three months of the year, well above the 4.6 percent predicted in an AFP survey of analysts.

Other data reinforced worries about the outlook, with industrial production and retail sales coming in well below forecasts, ramping up worries about the prospects for the next quarter.

With US rates seen staying higher for longer, the dollar continued to strengthen, and briefly hit a new 34-year high against the yen, putting the focus on Japanese authorities amid speculation they will step in to support the currency.

- Key figures around 1030 GMT -

London - FTSE 100: DOWN 1.4 percent at 7,854.15 points

Paris - CAC 40: DOWN 1.2 percent at 7,951.96

Frankfurt - DAX: DOWN 1.4 percent at 17,777.89

EURO STOXX 50: DOWN 1.3 percent at 4,921.15

Tokyo - Nikkei 225: DOWN 1.9 percent at 38,471.20 (close)

Hong Kong - Hang Seng Index: DOWN 2.1 percent at 16,248.97 (close)

Shanghai - Composite: DOWN 1.7 percent at 3,007.07 (close)

New York - Dow: DOWN 0.7 percent at 37,735.11 (close)

Dollar/yen: UP at 154.52 yen from 154.24 yen on Monday

Euro/dollar: DOWN at $1.0625 from $1.0626

Pound/dollar: DOWN at $1.2446 from $1.2449

Euro/pound: UP at 85.36 pence from 85.31 pence

Brent North Sea Crude: DOWN 0.2 percent at $89.90 per barrel

West Texas Intermediate: DOWN 0.3 percent at $85.17 per barrel

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F.AbuZaid--SF-PST