* Oil falls as some question impact of diplomatic row over Qatar
* Sterling recovers after fall on London attack, focus on election
* Wall Street seen opening lower after falls in Europe
* Thursday’s ECB meeting keeps lid on euro zone bond yields
* Gold hits six-week high after Friday’s U.S. jobs report
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Nigel Stephenson
LONDON, June 5 (Reuters) - Oil prices fell on Monday on concerns a diplomatic rift among some of the Arab world’s major energy producers could weaken a global deal on output cuts, while sterling shrugged off a deadly attack in London and focused on this week’s UK election.
Wall Street looked likely to open down 0.1 percent, index futures showed , after falls on European bourses.
The dollar lifted off seven-month lows hit on Friday in reaction to a weaker-than-forecast U.S. jobs report as U.S. Treasury yields rose and markets signalled they expected the Federal Reserve to raise interest rates next week.
European shares fell, failing to build on momentum from Asia, with some markets closed for a holiday.
In the Middle East, Qatar’s main stock index fell more than 7 percent after Saudi Arabia - the world’s biggest crude oil exporter - the United Arab Emirates, Egypt and Bahrain cut ties with Qatar, accusing the Gulf Arab state of supporting terrorism.
The move escalated a dispute over Qatar’s support for the Muslim Brotherhood, the world’s oldest Islamist movement.
Dubai stocks fell 0.7 percent and the main Saudi index also fell before reversing course to rise half a percent.
Qatar is the world’s biggest supplier of liquefied natural gas (LNG) and a major supplier of condensate.
Brent crude oil, the international benchmark, rose more than 1 percent at one point, recouping some of last week’s 4 percent losses, but turned tail in the European morning and dipped back below $50 a barrel. It stood at $49.57 a barrel, down 0.7 percent at 1138 GMT.
“I think it’s still going to be a bit of a debate on the true impact it can have on the oil market,” said Olivier Jakob, strategist at Petromatrix.
“In terms of oil flows it doesn’t change very much but there is a wider geopolitical impact one needs to consider,” he said, adding that a breakdown in relations between Qatar and Saudi Arabia could hamper an OPEC-led deal on production cuts.
Britain’s pound fell half a cent against the dollar after the third militant attack in Britain in less than three months but recovered and last traded at $1.2913, up 0.2 percent.
The modest reaction - the FTSE 100 stock index was down 0.2 percent, compared with a 0.2 percent dip in the pan-European STOXX 600 index - follows the pattern after attacks in other European cities in recent months.
Prime Minister Theresa May said Thursday’s election would go ahead. Opinion polls in the past week have put her Conservatives ahead, though with a narrowing lead over the Labour opposition.
Some have forecast a hung parliament, worrying those who had bet on a landslide win for May strengthening her hand in talks on Britain’s exit from the European Union.
“Even if May does just about enough to increase the majority - that could still potentially be sterling positive,” said ING currency strategist Viraj Patel.
“The worst case outcome is this grey area of uncertainty - the hung parliament and no stable government formed by Friday or Monday - markets will sell off on that.”
The dollar index, which measures the greenback against a currency basket, rose 0.2 percent, having hit its lowest since Nov. 9 after Friday’s report showing the U.S. economy added fewer jobs than expected last month. Unemployment, however, fell to a 16-year low of 4.3 percent.
U.S. 10-year Treasury yields, which fell on Friday, were up 1.6 basis points at 2.175 percent.
Markets see a 94.7 percent chance of the Federal Reserve raising interest rates at its June 13-14 meeting, according to Reuters calculations, though a Reuters poll on Friday showed top U.S. banks split about when the central bank hikes rates after that.
The euro dipped 0.3 percent to $1.1244 and the yen was down 0.1 percent at 110.52.
European Central Bank policymakers meet this week. They are expected to take a more benign view of the euro zone economy and discuss dropping pledges to ramp up economic stimulus if needed, sources with direct knowledge of the discussions told Reuters last week.
Germany’s benchmark 10-year bond yield rose 1.3 bps to 0.29 percent, close to one-month lows hit last week.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.1 percent. Japan’s Nikkei closed down less than 0.1 percent.
Gold hit a six-week high of $1,282 an ounce, with traders citing the U.S. jobs report and reduced prospects of aggressive Fed rate increases. It last traded at $1,281.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Nichola Saminather in SINGAPORE, Stephen Eisenhammer, Ritvik Carvalho in LONDON; Editing by Janet Lawrence and Susan Thomas)