Wires

UPDATE 4-Oil charts steadier course as tensions on Iran strike ebb - for now

Aaron Sheldrick

* Brent touches 4-month high before tensions ease

* Brent up 1% by 0613 GMT; WTI up 0.8%

* Attack on U.S. forces in Iraq stokes fears of wider conflict

* 'All is well!' - Trump; action 'concluded' - Iran minister

* Reuters live blog - https://www.reuters.com/live-events/tensions-in-the-middle-east-id2917592 (Adds comment, latest developments; updates prices)

TOKYO, Jan 8 (Reuters) - Oil prices were about 1% higher on Wednesday, but well below highs hit in a frenetic start to the trading day after a rocket attack by Iran on American forces in Iraq raised the spectre of a spiralling conflict and disruption to crude flows.

Prices gave up most of their gains after early surges as analysts said market tension could ease as long as oil production facilities remain unaffected by attacks. Tweets by U.S. President Donald Trump and Iran's foreign minister also appeared to signal a period of calm - for now.

Brent crude futures were up 67 cents, or 1%, to $68.94 by around 0613 GMT, after earlier rising as high as $71.75, the most since mid-September 2019.

West Texas Intermediate crude futures gained 47 cents, or 0.8%, to $63.17 a barrel. It earlier hit $65.85, the highest since late April last year.

Iran's missile attack on U.S.-led forces in Iraq came early on Wednesday, hours after the funeral of Qassem Soleimani, the commander of the country's elite Quds Force killed in a U.S. drone stroke on Jan. 3.

Tehran fired more than a dozen ballistic missiles from Iranian territory against at least two Iraqi military bases hosting U.S.-led coalition personnel, the U.S. military said on Tuesday. Stock, currency and gold markets were also roiled by the attacks.

Trump said in a tweet that an assessment of casualties and damage from the strikes was under way and that he would make a statement on Wednesday morning U.S. time. "All is well!" Trump said in the Twitter post.

'YO-YO' EFFECT

Analysts said oil markets remained focused for now on the targets in the Wednesday attack being military, rather than oil industry facilities.

"I think (Brent) prices will yo-yo around $70-75 unless the U.S. escalates by attacks on Iranian territory. But I doubt that Iran will escalate to all-out war, which they cannot win," said Tilak Doshi, visiting senior fellow, Middle East Institute at the National University of Singapore.

Early indications suggested no U.S. casualties, one source told Reuters, although other officials declined to comment. Iranian state television said 80 "American terrorists" had been killed and U.S. helicopters and military equipment damaged.

Iraq, Germany, Denmark and Norway said none of their troops were killed or injured.

"The reality remains that there has been no reports of oil supply disruptions and these attacks were aimed at military installations in Iraq," said Victor Shum, vice president of energy consulting at IHS Markit in Singapore, adding the world is well supplied with oil at the moment.

OPEC RESPONSE

The Organization of the Petroleum Exporting Countries will respond to any possible oil shortages if necessary but it also has "limitations", the United Arab Emirates energy minister said on Wednesday.

Suhail al-Mazrouei also said he sees no immediate risk of supplies through the important Strait of Hormuz being blocked.

In Wednesday's attack, Iranian news agency Mehr said Iran's Islamic Revolutionary Guard Corps had targeted the bases in Iraq that hosted U.S. forces. Tehran had vowed retaliation for the killing of military commander Soleimani.

"Iran took and concluded proportionate measures in self-defense," Iranian Foreign Minister Jawad Zarif said on Twitter. "We do not seek escalation or war, but will defend ourselves against any aggression," he added.

Meanwhile news of a jet crash in Tehran didn't disturb the return to calmer trading.

A Ukrainian Boeing 737 with at least 170 passengers crashed on Wednesday due to technical problems shortly after taking off from Tehran's Imam Khomeini airport and all aboard were killed, Iran's state television and a Ukrainian official said.

(Reporting by Aaron Sheldrick; Additional reporting by Florence Tan in Singapore; Editing by Kenneth Maxwell)