Sawt Falasteen - Crude slips as investor fears of Mideast regional war ease

Equities were mixed ahead of a Federal Reserve policy meeting this week, with traders fearing it will likely keep interest rates elevated for an extended period as inflation remains stubbornly high.

Crude pared Friday's almost three percent gains as Israel's military continued air and ground operations in Gaza, though it took a more cautious approach than feared.

Instead of a broad offensive, officials have currently opted for targeted attacks on a day-to-day basis, tempering worries of an all-out war that could drag in Iran and even the United States.

The White House urged Israel to protect innocent Palestinians in Gaza by distinguishing between Hamas militants and civilians, while the United Nations warned that "civil order" was starting to collapse in the territory.

Thousands of civilians have been killed on both sides since the conflict was triggered by an unprecedented attack on Israel by Hamas on October 7.

The threat of a wider conflict remains, with Iran saying the battle could "force everyone to take action", while US National Security Advisor Jake Sullivan said there was an "elevated risk" of a spillover.

Observers said investors had taken some of the pressure off prices since the conflict had not spread widely yet.

"The weekend showed the armed conflict remains limited to Israel and Gaza -- in that light, crude looked overbought," Vandana Hari, of Vanda Insights, said.

Crude will "likely continue sliding until the next risk event".

Equity markets struggled at the open to build on Friday's rally in Asia, but some reversed course in the afternoon or pared their losses.

Tokyo sank one percent, while Sydney, Jakarta and Wellington were also in the red.

However, Shanghai, Seoul, Mumbai, Singapore, Taipei and Bangkok rose. Hong Kong was marginally higher.

London, Paris and Frankfurt rose at the open.

With a string of economic data and events this week, including a US jobs market report, the Fed meeting and a gathering at the Bank of England, SPI Asset Management's Stephen Innes said there was "a nonstop flow of significantly tradable headlines".

"So investors appear reluctant to play (Monday) as risk appetite remained fragile, partly due to Israel's large-scale ground assault on Gaza over the weekend, which drew criticism from several Arab states," he added.

There was little relief for investors from data showing the Fed's preferred gauge of inflation remained at 3.4 percent in September, the same as the previous two months.

Analysts said the still-high reading -- well above the bank's two percent target -- meant officials would likely err on the side of hawkishness well into the new year, with borrowing costs unlikely to fall anytime soon.

"Expectations are for the bank to stand pat" this week, said National Australia Bank's Rodrigo Catril.

"But the recent uptick in inflation, consumer resilience and jump in inflation expectations, together suggest the Fed will retain a hawkish bias, leaving the door open for a hike in December and/or January," he added.

"Inflation and labour market data releases between now and then are going to be important, including non-farm payrolls on Friday."

- Key figures around 0810 GMT -

West Texas Intermediate: DOWN 1.9 percent at $83.94 per barrel

Brent North Sea crude: DOWN 1.7 percent at $87.70 per barrel

Tokyo - Nikkei 225: DOWN 1.0 percent at 30,696.96 (close)

Hong Kong - Hang Seng Index: FLAT at 17,406.36 (close)

Shanghai - Composite: UP 0.1 percent at 3,021.55 (close)

London - FTSE 100: UP 0.5 percent at 7,328.81

Dollar/yen: DOWN at 149.53 yen from 149.65 yen on Friday

Euro/dollar: DOWN at $1.0549 from $1.0567

Pound/dollar: DOWN at $1.2093 from $1.2120

Euro/pound: UP at 87.23 pence from 87.17 pence

New York - Dow: DOWN 1.1 percent at 32,417.59 (close)

Q.Bulbul--SF-PST