(Corrects to give full name of strategist at first mention in fourth paragraph)
* FTSEurofirst 300 index closes 0.1 percent lower
* Metro falls on recovery worries
* Autos fall
* Oils gain as Middle East tensions intensify
By Brian Gorman
LONDON, March 22 (Reuters) - European shares slipped on Tuesday, as investors worried about the outlook for higher interest rates in the euro zone and as tensions in the Middle East intensified.
The pan-European FTSEurofirst 300 index of top shares closed down 0.1 percent at 1,107.22 points, snapping a three-day winning run.
Some investors were worried by remarks made by Juergen Stark, who heads the European Central Bank's influential economics unit, which have bolstered the view that the ECB will raise interest rates next month, despite the crisis in Japan.
"Events in Japan won't change the policy of the European Central Bank, which sees price pressures mounting all over the place," said Heino Ruland, strategist at Ruland Research in Frankfurt. "We have pressure on wholesale prices. It's just a question of when consumer prices will respond."
He said he expected rates to go up 50 basis points in a "clear signal". But he said central banks would not raise rates too agressively as the recovery was still in its early stages in some countries.
In Britain inflation surged to a 28-month high of 4.4 percent last month, reviving speculation that the Bank of England will not wait much longer to raise its interest rates.
Among individual stocks, Metro, the world's fourth biggest retailer, fell 4.7 percent after saying risks to economic recovery had risen after the Japanese earthquake and the Libyan uprising, though it reported forecast-beating 2010 earnings.
Energy companies, however, helped to limit the index's losses, with crude oil prices briefly topping $116 a barrel as investors worried about potential supply disruptions from the conflict in Libya and spreading civil unrest in the Middle East.
ENI, Royal Dutch Shell and BG rose between 1 percent and 1.6 percent.
As well as supply disruption factors, strategists also cited a stronger demand outlook for oil.
"Demand for fossil fuels will stem from Japan, as it closes nuclear plants," said Ruland.
Ruland said he expected European equities to move sideways in the short term but to finish the year 20 percent up on current levels as he believes shares are "heavily undervalued with regard to bond markets and with regard to average PEs".
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC40 fell between 0.3 and 0.5 percent.
AUTOS SLIP
Peugeot fell 2.7 percent after it said diesel engine production will be hit from Wednesday by disruption to electronic component supplies following the Japanese earthquake disaster.
Others in the sector to fall included BMW and Renault, down 1.5 and 2.6 percent respectively.
But the insurance sector, which had been heavily sold off after the Japan disaster, added to gains made on Monday. Prudential rose 1.5 percent on a bullish note from UBS.
Analysts said the equity market was unlikely to make fresh highs in the medium term as uncertainty over the outcome of military intervention in Libya and fears over the nuclear power emergency in Japan would keep investors cautious.
"There are still many factors which on balance are worsening the environment for equities (and) the medium term-impact is still very uncertain," said Tammo Greetfeld, equity strategist at UniCredit.
The uncertainty surrounding geopolitical events have knocked the equity market in recent weeks, as investors worry that high oil prices arising from the unrest in the oil-rich Middle East and North Africa region and the economic impact of Japan's earthquake could derail a fragile global economic recovery. (Editing by Greg Mahlich)