Il Nuovo Postiglione - US stocks fall, bond yields rise as Middle East war drags on

Oil prices also rose, although crude finished well below session highs as traders were heartened that Trump also signaled he expects talks to continue.

Markets also digested a report from Iranian state media that Iran's Foreign Minister Abbas Araghchi was set to meet on Monday with Qatari mediators in New York.

Wall Street indices spent the entire session in the red, with the broad-based S&P 500 closing down 0.8 precent.

"The ongoing Washington and Tehran impasse is roiling markets to start the week, as yields soar further into the nosebleeds," said Jose Torres of Interactive Brokers. "The geopolitical premium bolstering oil prices is worrying Wall Street that the Fed will meaningfully tighten monetary policy to constrain inflation."

Europe was sluggish throughout and London and Frankfurt closed 0.1 percent down, while Paris ended flat.

Asia had ended the day mixed as markets also reacted to Washington and Beijing extending their trade truce at the end of last week.

With no sign of an imminent end to the war pitting the United States and Israel against Iran, European natural gas prices also rose on Monday, while average diesel prices in the United Kingdom hit a record high just shy of two pounds per liter, according to the RAC motoring organization.

On the downside, "gold prices have slumped from their summer highs as investors have reacted to the stronger dollar -- which makes the metal more expensive for non-dollar buyers," said AJ Bell investment director Russ Mould.

Iran set out a plan at the United Nations General Assembly last week for a halt in hostilities that would see the Strait of Hormuz reopened, easing a crippling energy supply crisis that has jacked up global costs.

The waterway is key to the world's oil and gas deliveries and is now central to the conflict between the US and Iran, particularly with the Iran-backed Houthis seizing Yemen's entire Red Sea coast, including the Bab al-Mandab Strait, another vital shipping lane.

Trump on Saturday publicly rejected Iran's latest proposal for ending the war, but told US media outlet Axios on Sunday that he expected talks to resume in the coming days.

State news agency IRNA on Monday quoted an unnamed source close to the UN delegation as saying there were no more talks scheduled with the US.

But Iran's state broadcaster said Araghchi will meet with Qatari representatives, with the talks expected to focus on "messages exchanged with the United States through intermediaries... particularly regarding the conditions set by Iran for the reopening of the Strait of Hormu."

- Key figures at around 2015 GMT -

Brent North Sea Crude: UP 0.9 percent at $105.28 per barrel

West Texas Intermediate: UP 0.2 percent at $92.60 per barrel

New York - Dow: DOWN 0.7 percent at 51,481.51 (close)

New York - S&P 500 : DOWN 0.8 percent at 7,683.69 (close)

New York - Nasdaq: DOWN 0.9 percent at 26,820.38 (close)

London - FTSE 100: DOWN 0.1 percent at 10,684.88 (close)

Paris - CAC 40: FLAT at 8,078.48 (close)

Frankfurt - DAX: DOWN 0.1 percent at 25,374.42 (close)

Tokyo - Nikkei 225: DOWN 0.7 percent at 65,877.62 (close)

Hong Kong - Hang Seng Index: UP 0.5 percent at 24,642.51 (close)

Shanghai - Composite: DOWN 1.7 percent at 3,823.62 (close)

Euro/dollar: DOWN at $1.1367 from $1.1391 on Friday

Pound/dollar: UP at $1.3252 from $1.3247

Dollar/yen: UP at 157.42 yen from 157.28 yen

Euro/pound: DOWN at 85.78 pence from 86.00 pence

burs-jmb/des

D.Campanella--INP