GLOBAL MARKETS-Stocks nudge higher, bonds struggle as Iran war spurs hawkish rate rethink

* Traders move to price in hikes for BoE and ECB this year

* Fed seen leaving rates on hold

* Hawkish rate repricing hits bonds

* Oil prices, shares remain choppy (Updates throughout)

By Sophie Kiderlin and Rae Wee

LONDON/SINGAPORE, March 20 (Reuters) - Global shares nudged higher but were still headed towards a weekly loss on Friday, while bonds steadied somewhat after the previous day's rout as central bankers warned that the Middle East war could reignite inflation.

A brief dip in oil prices earlier in the day offered some temporary relief for markets, but trading stayed choppy and nerves frayed, highlighting how brittle investor confidence remains.

Following a busy week of monetary policy meetingsacross the Group of Seven nations and others, the key takeaway for investors has been the prospect of a more aggressive policy tightening path.

"Clearly central banks have learned that it's very dangerous to say that an energy shock is purely transitory," said Sandra Horsfield, economist at Investec, while also noting the risk of both direct and indirect effects.

"So hence we have a more hawkish-sounding reaction."

Traders are no longer expecting a Federal Reserve rate cut this year, while futures imply a more than 50% chance of a hike from the Bank of England next month . Sources said the European Central Bank may need to begin discussing rate increases in April and possibly tighten policy in June, while markets saw an April hike from the ECB as a coin toss.

"For the time being, though, sending a more hawkish message seems a very sensible thing. But again, it's hawkish, but it's not immediate action," Horsfield said.

A rout in global bonds pushed yields to multi-month highs on Thursday, though markets appeared to be steadying to some extent on Friday.

Germany's two-year yield, which is up over 57 basis points for the month, was last up 1.7 bps at 2.58%. Yields on two-year British gilts were just over 3 bps higher at 4.44%, having jumped close to 92 bps this month already.

In equities, Europe's cross-regional STOXX 600 rose 0.4% on Friday, but was still on track for a 1.7% weekly decline, while the MSCI All-World index was set to fall for the third consecutive week.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5% on Friday. Nasdaq futures and S&P 500 futures both nudged lower.

ENERGY CHOKEHOLD

Brent crude futures were 0.86% higher at $109.58 a barrel, reversing earlier declines, while U.S. crude was little changed, also after having pulled back earlier. Leading European nations and Japan offered to join efforts to secure safe passage for ships through the Strait of Hormuz and the U.S. outlined moves to boost oil supply.

Natural gas prices have also soared, with those in Europe skyrocketing as much as 35% on Thursday, as Iranian and Israeli strikeshit some of the Middle East's most important gas infrastructure.

That prompted U.S. President Donald Trump to tell Israel not to repeat its attacks on Iranian natural gas infrastructure.

"Even if the U.S. leaves (the conflict), Israel might not leave, and there may still be some strikes and Iran will retaliate, maybe at a lower volume," said Alicia Garcia-Herrero, chief Asia-Pacific economist ?at Natixis.

"But this means that the Gulf will still be under pressure... so oil prices will not go back to $60, they will maybe stay at $90, at least until the end of the year. So the shock is already unavoidable."

DOLLAR FALLS FROM PEAK

The dollar was set for a weekly loss of roughly 1.1%, despite nudging higher on Friday, as the Fed is now seen as the only major central bank that is not expected to raise rates this year.

That kept the euro holding onto most of Thursday's 1.2% gains to fetch $1.1562, while sterling dipped 0.22% to $1.34, after a 1.3% rise the previous day.

The yen, which was on the cusp of 160 per dollar in the previous session, last stood at 158.63.

The Japanese currency was also helped by some hawkish comments from Bank of Japan Governor Kazuo Ueda on Thursday, after the central bank held rates steady but maintained its bias for tighter monetary policy.

In precious metals, spot gold was up 0.64% at around $4,677 an ounce.

(Reporting by Sophie Kiderlin in London and Rae Wee in Singapore; Editing by Sam Holmes, Shri Navaratnam and Gareth Jones)