* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Nikkei bounces 0.5% in cautious trading
* Oil retreats on doubts Iran would disrupt supplies
* Yen pulls back, but gold holds most of its gains
By Wayne Cole
SYDNEY, Jan 7 (Reuters) - Asian shares rebounded on Tuesday as a day passed without a new escalation in the Middle East and Wall Street erased early losses to end in the black as tech stocks climbed.
Oil surrendered some hefty gains as many doubted Iran would strike back in a way that would disrupt supplies, and its own crude exports. O/R
Brent crude LCOc1 futures stood at $68.91 a barrel, having been as high as $70.74 at one stage, while U.S. crude CLc1 fell 32 cents to $62.95.
Gold XAU= held firm at $1,563.50, after scaling a near seven-year peak of $1,579.72 overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.3%, after a 0.7% drop the previous session. Japan's Nikkei .N225 edged up 0.5% and South Korea .KS11 0.6%.
E-Mini futures for the S&P 500 ESc1 held steady.
Shares had fallen sharply on Monday as Iran and the United States traded threats after an U.S. air strike killed a top Iranian commander.
The mood calmed a little as the session passed with no new aggression.
Instead there was much confusion when the U.S, military wrote to Iraq on Monday saying it would pull out of the country, a letter seen by Reuters showed. U.S. Defense Secretary Mark Esper told Pentagon reporters that no decision had been made and the military said the letter was only a poorly worded draft. Street chose to hope for the best and the Dow .DJI rose 0.24%, while the S&P 500 .SPX gained 0.35% and the Nasdaq .IXIC 0.56%.
Surveys of service sectors out overnight showed some improvement in the United States, UK and EU, stirring speculation the closely-watched ISM measure of U.S. services due later Tuesday will also show strength.
"We think the longest US expansion on record still has plenty of legs," said Tom Porcelli, chief U.S. economist at RBC Capital Markets. "To be sure, Iran adds an additional layer of complexity."
"But while the risk of conflict has increased, the reality is this is likely to be limited to proxy skirmishes," he argued. "The risk of a "hot" conflict seems low as Iran is unlikely to respond in such a way that risks a significant escalation from the United States."
The calmer mood saw the yen lose much of its safe-haven gains, with the dollar bouncing to 108.37 yen JPY= from a low of 107.75 hit on Monday.
The euro edged up to $1.1195 EUR= , but faces stiff chart resistance around $1.1240, while sterling made gains to $1.3170 GBP= on better economic data at home.
Against a basket of currencies, the dollar had drifted off to 97.618 .DXY but stayed above the recent six-month trough of 96.355.
https://tmsnrt.rs/2zpUAr4 Asia-Pacific valuations
https://tmsnrt.rs/2Dr2BQA
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Shri Navaratnam)