GLOBAL MARKETS-World stocks, oil prices slump

* Global shares on track for biggest 1-day fall in 4 weeks

* Oil falls sharply on demand, economic worries

* Yen up as investors unwind carry trades; dollar down (Updates prices)

By Wanfeng Zhou

NEW YORK, April 12 (Reuters) - Oil prices dropped sharply for a second day on Tuesday and helped drag world stock prices down after Goldman Sachs warned that crude had gotten ahead of fundamentals and was set to fall.

Oil traded in New York was down more than 7.0 percent in two days after Goldman Sachs predicted Brent prices would fall back to $105 in "coming months," down from $120 on Tuesday, and after the International Energy Agency said high prices could be eroding demand.

World stocks, as measured by the MSCI's main world equity index <.MIWD00000PUS>, were last down 1.2 percent, the index's biggest one-day decline in four weeks.

Worries over global growth were heightened after Japan's economic minister warned that damage caused by last month's earthquake and tsunami could be worse than initially thought for the world's third-largest economy. [ID:nL3E7FC092]

Japan's move to put the severity of radiation leakage at its stricken Fukushima nuclear plant on a par with the worst nuclear disaster, at Chernobyl, also weighed on sentiment. [ID:nL3E7FB2TZ]

"The market is increasingly becoming concerned about the situation in Japan and that high oil prices and high commodity prices will eventually hurt economic growth," said Mark Bronzo, money manager at Security Global Investors in Irvington, New York.

U.S. stocks fell after disappointing revenue figures from aluminum maker Alcoa Inc started the earnings season late on Monday.

The Dow Jones industrial average <.DJI> was down 108.94 points, or 0.88 percent, at 12,272.17. The Standard & Poor's 500 Index <.SPX> fell 9.92 points, or 0.75 percent, to 1,314.54. The Nasdaq Composite Index <.IXIC> lost 27.01 points, or 0.97 percent, at 2,744.50.

The benchmark 10-year U.S. Treasury note was up 22/32, with the yield at 3.5017 percent, on a safety bid. In addition, a $32 billion sale of three-year notes drew good demand, pricing at a slightly lower high yield, at 1.28 percent, than where the notes traded before the auction.

The FTSEurofirst 300 index <.FTEU3> of top European shares slipped 1.7 percent, with miners and energy firms among the heaviest losers. Emerging markets <.MSCIEF>, which count several resource exporters in their ranks, fell 1.9 percent.

Brent crude oil dropped $3.32 to $120.66 a barrel, pulling back from Monday's 2-1/2 year high after the warnings from the IEA [ID:nL3E7FC04S] and Goldman Sachs . U.S. crude lost $3.88 to 106.04 a barrel.

Societe Generale also said rising gasoline prices in the United States were fueling a debate about "demand destruction" in the world's top economy. "Geopolitics (are) still critical. But with prices high, markets may be having doubts on demand," SocGen said.

Spot gold fell from Monday's record high while silver sagged from the previous session's 31-year high.

The Reuters-Jefferies CRB index <.CRB>, a global commodities benchmark, fell about 2 percent in its sharpest one-day decline in a month as raw materials markets came under pressure from a sell-off in oil.

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All Commodities Futures Trading Commission positions:

http://r.reuters.com/buv87r

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SAFE-HAVEN DEMAND

The yen and Swiss franc rose as jittery investors sold riskier trades funded by borrowing in the two low-yielding currencies.

"Carry trades are owned heavily and looked overextended, especially the yen crosses. These are the ones looking shaky," said Tom Fitzpatrick, chief technical strategist at CitiFX in New York.

The yen firmed to a 1-1/2 week high versus the U.S. dollar , though gains are likely to be curbed by the Bank of Japan's perceived determination to keep monetary policy loose to aid economic recovery.

The dollar fell 1.2 percent against the Swiss franc to 0.8957. It earlier dropped to 0.89421, its lowest in more than three weeks.

The euro rose to a 15-month high against the dollar above $1.45, boosted by reported buying from China and news the world's second-largest economy was willing to purchase more Spanish debt.

Dovish comments from key U.S. Federal Reserve officials weighed on dollar sentiment. Two of the Fed's most powerful officials, Janet Yellen and William Dudley, said the U.S. central bank should stick to its super-easy monetary policy as inflation is not a threat and unemployment remains too high. [ID:nN11296347]

The U.S. dollar index <.DXY>, which tracks the greenback against a basket of major currencies, was down 0.3 percent at 74.835 after hitting 74.704, its lowest since December 2009. (Additional reporting by Angela Moon and Gertrude Chavez-Dreyfuss in New York and Sebastian Tong in London; Editing by Dan Grebler)