GLOBAL MARKETS-Oil up on Yemen unrest; rate outlook dents dollar

* U.S., Europe stocks dip; Wall Street volume low

* Euro retreats versus dollar; DXY near 15-month low

* Nikkei futures dip after three days of gains

* U.S. crude up as unrest escalates in Yemen (Updates prices, adds gold, quote)

By Rodrigo Campos

NEW YORK, March 22 (Reuters) - U.S. crude prices jumped on Tuesday as unrest in Yemen raised concerns about a further threat to supply and as the dollar traded near 15-month lows against major currencies.

Expectations that interest rates will rise in Europe before they do so in the United States weighed on the dollar. Although the euro eased back after hitting a 4-1/2-month high against the dollar, expectations of a euro zone rate hike next month could limit any downside for the single currency.

And UK inflation data on Tuesday fueled expectations of a British rate hike in coming months, driving sterling to a 14-month high against the greenback.

Stocks in the United States and Europe fell slightly, with the recent rally keeping in check the worries over the crises in Japan and Libya.

"The combination of Japan getting better and some progress in Libya has been enough to get people interested again," said Perry Piazza, director of investment strategy at Contango Capital Advisors in San Francisco. "That said, there's still a lot of uncertainty and high commodity prices that are starting to dent confidence."

With crude oil flows from Libya already crippled by a standoff between rebels and the government, worries over further supply disruptions rose as thousands of Yemeni protesters took to the streets clamoring for President Ali Abdullah Saleh to step down.

"The situation in the Middle East is still very bullish for oil," said Phil Flynn, analyst at PFGBEST Research in Chicago. "The unrest spreading on top of the conflict in Libya is still the market focus."

The Dow Jones industrial average <.DJI> dipped 9.62 points, or 0.08 percent, to 12,026.91. The Standard & Poor's 500 Index <.SPX> slipped 3.75 points, or 0.29 percent, to 1,294.63. The Nasdaq Composite Index <.IXIC> fell 7.13 points, or 0.26 percent, to 2,684.96.

Trading volumes remained subdued on Wall Street.

The MSCI global stocks index <.MIWD00000PUS> was up 0.4 percent, buoyed by an overnight rise in Japanese stocks.

Europe's main equity benchmark <.FTEU3> closed 0.06 percent lower after hitting a one-week high on Monday.

Tokyo's Nikkei average <.N225> added 4.4 percent as traders returned from a national holiday, but U.S. dollar-denominated Nikkei futures were trading lower after three days of hefty gains.

"There's a relative calmness in markets as investors plot their next moves, even though we're flying through fog with all the issues that remain uncertain," said Jeffrey Davis, chief investment officer at Lee Munder Capital Group in Boston.

The CBOE volatility index <.VIX> edged 2.4 percent lower to 20.12 after a near 16 percent drop on Monday.

"Most investors are pretty safe now, and I suspect the VIX should continue to settle back down gradually," Davis said.

U.S. trading volume slowdown http://r.reuters.com/gyp68r

Japan earthquake in graphics http://r.reuters.com/fyh58r

EURO RETREATS, CRUDE REVERSES LOSSES

In currency markets the euro dipped after hitting $1.4249 versus the U.S. dollar, its highest level since November, as it ran into what traders said were options-related barriers.

Still, expectations that the European Central Bank will hike interest rates next month could limit any downside for the common currency.

"This, to me, is just a technical pullback," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey.

The dollar also had hit a a 15-month low against other major currencies <.DXY> but the index was trading near break even.

Gold was little changed as interest-rate hike expectations kept the market calm, but air strikes on Libya and escalating political unrest in the Middle East underpinned safe-haven demand.

U.S. oil prices rose 1.6 percent to $104.53 per barrel while Brent added 0.8 percent at $115.91.

Copper rose as worries about Japan's nuclear crisis eased and boosted risk appetite, and supported by the weaker dollar, but poor Chinese import data weighed on demand prospects.

Chinese data released on Monday showed lower-than-expected commodities imports for February.

China's rare earth metal export prices in February, however, were up almost ninefold from a year before, according to Reuters calculations based on Chinese data [ID:nTOE72L01E].

Shares in U.S. miner Molycorp , one of the few companies outside China that is well-placed to capitalize on the constriction in supply, jumped more than 14 percent.

U.S. Treasuries were little changed in low volume as investors looked for further progress in Japan and the Middle East. Benchmark 10-year notes were last unchanged in price, yielding 3.33 percent. (Additional reporting by Ryan Vlastelica, Karen Brettell, Wanfeng Zhou, Joshua Schneyer and Tom Miles; Editing by Leslie Adler)