Early moves were contained, with the dollar getting only a minor safe-haven bid and no sign of panic selling across markets. Oil prices were up around 2.8 percent, but off their initial peaks.

Optimists were hoping Iran might back down now its nuclear ambitions had been curtailed, or even that regime change might bring a less hostile government to power there.

"Markets may be responding not to the escalation itself, but to the perception that it could reduce longer-term uncertainty," said Charu Chanana, chief investment strategist at Saxo.

"That said, any sign of Iranian retaliation or threat to the Strait of Hormuz could quickly shift sentiment and force markets to reprice geopolitical risk more aggressively."

The Strait of Hormuz is only about 33 kilometers wide at its narrowest point and sees around a quarter of global oil trade and 20 percent of liquefied natural gas supplies.

Analysts at JPMorgan also cautioned that past episodes of regime change in the region typically resulted in oil prices spiking by as much as 76 percent and averaging a 30 percent rise over time.

"Selective disruptions that scare off oil tankers make more sense than closing the Strait of Hormuz given Iran’s oil exports would be shut down too," said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia.

"In a scenario where Iran selectively disrupts shipping through the Strait of Hormuz, we see Brent oil reaching at least US$100/bbl."

Goldman Sachs warned prices could temporarily touch $110 a barrel should the critical waterway be closed for a month.

For now, Brent was up a relatively restrained 1.8 percent at $78.42 a barrel, while US crude rose 1.9 percent to $75.26. Elsewhere in commodity markets, gold edged down 0.1 percent to $3,363 an ounce.

KEEP CALM AND CARRY ON

World share markets were proving resilient so far, with S&P 500 futures off a modest 0.3 percent and Nasdaq futures down 0.4 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.0 percent, while Chinese blue chips dipped 0.2 percent. Japan's Nikkei eased 0.6 percent, though surveys showed manufacturing activity there returned to growth in June after nearly a year of contraction.

EUROSTOXX 50 futures lost 0.4 percent, while FTSE futures fell 0.3 percent and DAX futures slipped 0.5 percent. Europe and Japan are heavily reliant on imported oil and LNG, whereas the United States is a net exporter.

The dollar edged up 0.3 percent on the Japanese yen to 146.50 yen, while the euro dipped 0.2 percent to $1.15. The dollar index firmed marginally to 98.958.

There was also no sign of a rush to the traditional safety of Treasuries, with 10-year yields rising 2 basis points to 4.395 percent.

Futures for Federal Reserve interest rates were a tick lower, likely reflecting concerns a sustained rise in oil prices would add to inflationary pressures at a time when tariffs were just being felt in US prices.

Markets are still pricing only a slim chance the Fed will cut at its next meeting on July 30, even after Fed Governor Christopher Waller broke ranks and argued for a July easing.

Most other Fed members, including Chair Jerome Powell, have been more cautious on policy leading markets to wager a cut is far more likely in September.

At least 15 Fed officials are speaking this week, and Powell faces two days of questions from lawmakers, which is certain to cover the potential impact of President Donald Trump's tariffs and the attack on Iran.

The Middle East will be high on the agenda at a NATO leaders’ meeting at the Hague this week, where most members have agreed to commit to a sharp rise in defense spending.

Among the economic data due are figures on US core inflation and weekly jobless claims, along with early readings on June factory activity from across the globe.