LONDON, Oct 10 Reuters Global stocks snapped higher on Tuesday, in line with a retreat in bond yields after Federal Reserve officials signaled the recent yield surge could justify caution on interest rates, while oil eased, but violence in the Middle East made for nervy trading.

The MSCI AllWorld index rose for a fifth day, up 0.5, after having hit fivemonth lows last week, thanks in part to a 1.4 rise in Europe39;s STOXX 600.

Emini futures for the SP 500 index were up between 0.10.2, while Treasuries staged a powerful rally, catching up with the decline in yields across global bond markets on Monday, when the U.S. market was closed for a holiday.

The rush into perceived safehaven assets such as the dollar, gold and government bonds at the start of the week eased somewhat, while oil prices, which surged by over 4 at one point on Monday, retreated.

But investors were closely watching military clashes between Israel and the Palestinian Islamist group Hamas, after the latter unleashed a surprise assault at the weekend in which hundreds were killed and many abducted.

The Israeli military has since said it called up an unprecedented 300,000 reservists and was imposing a total blockade on the Gaza Strip, raising expectations of a possible ground assault.

Geopolitical tensions are a huge problem for markets, just because the range of outcomes is very wide and, therefore, unless there is a clear direction of travel and development, it39;s very hard to decide which way…