EMERGING MARKETS-EM stocks fall on Fed rate hike fears, fresh Middle East strikes

* Indonesia's forex reserves hit two-year low after currency interventions

* South Korea and Taiwan indexes slump as AI rally pauses

* U.S. jobs data fuels Fed rate hike bets, strengthens dollar

By Avinash P

June 8 (Reuters) - Emerging market stocks fell on Monday as strong U.S. jobs data raised expectations of a rate hike by the Federal Reserve, while fresh attacks in the Middle East pushed up oil prices and fuelled inflation fears. Stronger-than expected U.S. payrolls data on Friday reinforced hawkish bets, with traders pricing in a roughly 73% chance of at least one Fed rate hike by the end of the year, according to data compiled by LSEG.

MSCI's global EM stock index fell 3.6% and was poised for its worst intraday showing in three months. The currencies gauge eased 0.1% against a stronger U.S. dollar.

"The bulk of the sell-off on Friday happened when Asian markets were closed. So Asian markets are now playing catch up today," said Kathleen Brooks, research director at XTB.

Tech-heavy bourses in South Korea and Taiwan slumped 8.3% and 3.5%, respectively, and were on track for their biggest daily drop in three months, as the rally in AI stocks paused, tracking losses on Wall Street.

Both indexes have risen more than 50% so far this year, powered by the AI boom, and led gains on the broader MSCI stocks gauge.

The South Korean won rose 1.7% after hitting its weakest level against the dollar in more than 17 years. The country's financial authorities agreed to investigate and take stern action against speculative trading that has fuelled sharp swings in the currency. Indonesia's rupiah extended its slump, hitting a fresh low. Local stocks were down 4.5%. The nation's forex reserves dropped by $1.3 billion in May to $144.9 billion, their lowest in nearly two years, following its interventions in the currency market, Bank Indonesia said. In the Middle East, Israel said it hit a petrochemical plant in Iran's southwest, and other military targets, the first such strikes since a ceasefire came into effect two months ago.

Oil prices jumped 4.8% as the latest flare-up threatened to complicate efforts to secure a wider peace deal in the region.

Chinese stocks hit their lowest in two months, while India's benchmarks were down 0.9%. India's inflation likely rose to the Reserve Bank of India's medium-term target of 4% in May, driven by higher fuel costs and vegetable prices, a Reuters poll showed.

Elevated oil prices have stoked inflation fears globally and can be a bigger drag on energy-importing economies in emerging markets.

Several dollar-denominated bonds in Sri Lanka and Egypt were down more than 1 cent each.

Equities in Turkey dipped 0.1%, while South Africa's fell 0.8%. The Turkish lira and rand were flat.

Most emerging European currencies were flat against the euro, while stock indexes were down.

Polish equities fell 1.1%, Romania was down 0.8% and Hungarian stocks eased 0.4%. Elsewhere, Armenia's ruling Civil Contract party won just under half of the votes in a parliamentary election seen as a test of its handling of a peace deal with Azerbaijan and its growing pivot to the West, away from traditional patron Russia.

HIGHLIGHTS:

** South Korea flags new big investment project as tax revenue swells on AI boom ** Indonesia central bank, finance minister agree to boost asset yields to aid rupiah ** Brazil to announce first panda bond issuance during China visit in June, say sources

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For RUSSIAN market report, see (Reporting by Avinash P in Bengaluru; Editing by Kirsten Donovan)