Oil gains on Iraqi violence; bonds steady on safety bid

NEW YORL (Reuters) - Oil prices rose on Monday after the Sunni insurgency in Iraq raised concerns over potential disruption to crude supplies, while that violence and renewed tensions in Ukraine drove buying of safe-haven currencies and bonds.

Fighting in Iraq and Ukraine damped global equity markets, even though merger activity offset some declines on Wall Street, where stocks traded near break-even.

Investor unease hit the Nikkei .N225 early in the day as Tokyo suffered its biggest fall in a month, while European shares .FTEU3 were in the red for the third time in four days.

Russian natural gas exporter Gazprom GAZP.MM reduced supplies to Ukraine on Monday after Kiev failed to meet a deadline to pay off its gas debts in a dispute that could disrupt supplies to the rest of Europe.

"There was a reasonable flight-to-quality bid overnight with the developments in Iraq and Gazprom, so global equities were under a fair amount of pressure and that gave a bid to longer-dated Treasuries," said Ian Lyngen, senior government bond trader at CRT Capital in Stamford, Connecticut.

MSCI's all-country world equity index .MIWD00000PUS edged down 0.1 percent. The FTSEurofirst 300 .FTEU3 index of top European shares closed down 0.42 percent at 1,383.95.

The Dow Jones industrial average .DJI fell 19.52 points, or 0.12 percent, at 16,756.22. The Standard & Poor's 500 Index .SPX was down 0.75 points, or 0.04 percent, at 1,935.41. The Nasdaq Composite Index .IXIC was up 0.10 points, or 0.00 percent, at 4,310.75.

Brent crude for August delivery LCOc1 was up 48 cents at $112.94 a barrel. U.S. oil CLc1 was up 9 cents at $107.00 a barrel.

The yen and the Swiss franc rose, with the Japanese currency hitting a four-month high against the euro as investors sought safety.

The dollar slipped as traders await clues from the U.S. Federal Reserve on the timing of an interest rate increase amid doubts about the economic recovery.

The dollar fell 0.21 percent to 101.84 yen JPY=, while the euro fell to a four-month low against the yen before paring much of its decline. It was last at 138.19 yen EURJPY=EBS in U.S. trading.

The dollar and euro were also weaker against the Swiss franc, another safe-haven currency, trading at 0.8971 franc CHF= and 1.21770 francs EURCHF=EBS respectively.

U.S. Treasuries prices rose as Iraq and Ukraine increased demand for safe-haven bonds, though solid U.S. economic data limited gains.

Benchmark 10-year notes US10YT=RR were last up slightly to yield 2.6024 percent.

(Reporting by Herbert Lash; Additional reporting by Marc Jones in London; Editing by Dan Grebler)