GLOBAL MARKETS-World stocks slip; oil rises on supply worry

* Crude oil rise on supply worries, Mideast protests

* World stocks down after softer U.S. retail sales

* Dollar climbs to 8-week high versus yen (Recasts lead, updates prices, adds comment)

By Wanfeng Zhou

NEW YORK, Feb 15 (Reuters) - World stocks slipped on Tuesday after weaker-than-expected U.S. retail sales tempered some optimism about the American economy, while oil prices rose as protests in Middle East countries raised concerns about potential supply disruptions.

The MSCI world stocks index <.MIWD00000PUS> dropped 0.2 percent, though the index remained near last week's 30-month highs. U.S. stocks <.DJI> <.SPX> fell after data showed sales at U.S. retailers rose only 0.3 percent in January as extreme weather in large parts of the country kept shoppers at home.

"I don't know if today's data was soft enough to take the legs from underneath the market, but interestingly it's indicative of some spending exhaustion occurring in the consumer space," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

U.S. crude oil for March delivery staged a rally as in early New York trading, climbing as high as $85.97, rebounding from a 2-1/2-month low set in the previous session.

Last week's ousting of Egyptian President Hosni Mubarak and the toppling of his Tunisian counterpart Zine al-Abidine Ben Ali a month earlier have raised concern among investors that the unrest spreading in the Middle East could disrupt oil supplies.

"We are seeing contagion from Tunisia and Egypt to other countries that are more important for the oil markets," said Christophe Barret, oil analyst at Credit Agricole Corporate and Investment Bank.

Stocks worldwide earlier Tuesday got a boost after Chinese inflation data came in lower than expected at 4.9 percent in the year to January, easing investor concerns that the world's No. 2 economy will have to tighten monetary policy more aggressively. [ID:nTOE71E01Y]

"The data probably slightly eased expectations of immediate tightening, although in the overall scheme of things, this doesn't change the fact that China is still in a tightening phase," said Etsuko Yamashita, chief economist at SMBC.

Inflation pressures, particularly in emerging markets, have been part of the motivation this year for investors to move into developed stock markets.

Japan's Nikkei <.N225> stock index logged a 10-month closing high and Europe's FTSEurofirst 300 <.FTEU3> was little changed on the day.

DOLLAR AND YIELDS

The U.S. dollar climbed as high as 83.93 yen on trading platform EBS, the highest level since mid-December, boosted by a rise in U.S. Treasury yields.

Two-year notes yields earlier reached 0.89 percent, their highest level since May of last year.

But the dollar slipped versus the euro , which was boosted by demand from Middle East and Asian investors. Analysts cautioned that euro sentiment remained fragile given scepticism over whether euro zone leaders would come up with a quick and effective solution to tackle its debt crisis.

Yield spreads of heavily indebted euro zone countries have been widening in the past week on uncertainty over a rescue package for the region, and there was some disappointment after a meeting of European finance ministers on Monday.

"Initial optimism at the beginning of the year over a comprehensive bailout package in the euro zone is now starting to fade away," said Lee Hardman, currency strategist at BTM UFJ.

Data showed that the euro zone ended last year with stable economic growth, disappointing those hoping for a faster recovery as expansion in the three largest nations fell short of forecasts and Greece and Portugal contracted.

Countering this, German analyst and investor sentiment rose slightly in February amid confidence in Germany's economic recovery, a survey by the ZEW economic think tank showed. (Additional reporting by Edward Krudy in New York and Jeremy Gaunt and Claire Milhench in London)