GLOBAL MARKETS-Oil hits 2-1/2 year high on pipeline shutdown, stocks take breather

* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh

* Brent hits $65 a barrel

* Commodity currencies benefit from oil price spike

* World shares flat after 3 days of gains

* Dollar eases ahead of Fed meeting

By Ritvik Carvalho

LONDON, Dec (Shanghai: 600875.SS - news) 12 (Reuters) - Oil prices jumped to their highest in more than two years on Tuesday after the shutdown of a North Sea pipeline knocked out significant supply from an already tightening market.

World stocks took a break from a three-day rally.

Brent crude futures, the global benchmark for oil prices, rose above $65 a barrel -- their highest since mid-2015 -- after Britain's Forties pipeline was shut due to cracks as a cold snap sweeps the country.

The Forties pipeline is important for the global oil market because the crude it carries normally sets the price of dated Brent, a benchmark used to price physical crude around the world and which underpins Brent futures.

The shutdown comes as oil supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) have helped chip away an excess of inventories built up following a global supply glut which began to emerge in late 2014.

"Such a reaction (in prices) indicates that supply disruptions can no longer be ignored in tight markets," said Hussein Sayed, analyst at FXTM.

U.S. crude oil futures were last 0.5 percent higher at $58.30 a barrel.

Prices of gas across Europe also soared following an explosion at Austria's main gas transfer hub and as Russian gas

Meanwhile, the MSCI (Frankfurt: 3HM.F - news) index of world equities, which tracks stocks across 47 countries, was flat after posting three straight days of gains.

The jump in oil helped boost energy-heavy European stock indices, with the pan-European STOXX index rising 0.1 percent in morning deals in London. Europe's oil and gas sector index hit its highest in a month.

Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan drifted off 0.3 percent, having bounced 2 percent in the past three sessions, with markets consolidating in the hope an upswing in global growth could outlast a likely hike in U.S. interest rates this week.

Commodity-linked currencies also got a boost from the pick up in oil prices. The Australian dollar and the New Zealand dollar were both over half a percent higher while the Norwegian crown rose 0.7 percent.

CENTRAL BANK SEASON FINALE

Investors continued their policy vigil with the U.S. Federal Reserve set to end its two-day meeting on Wednesday, while the European Central Bank and the Bank of England will meet for the last time in 2017 on Thursday.

JPMorgan (LSE: JPIU.L - news) economist David Hensley suspects the Fed will revise up its growth forecast while trimming the outlook for the unemployment rate, potentially adding upside risk to the "dot plot" forecasts on interest rates.

"The dot plot previously called for three hikes in 2018; it is a close call whether this moves to four hikes," he warned, a shift that would likely boost the dollar but could bludgeon bonds.

"For its part, the European Central Bank (ECB)is likely to emphasize its low-for-long stance and continue to distance itself from the Fed," he added. "The staff is likely to revise up its 2018 growth forecast, while we think the core inflation forecast will reveal an even slower recovery than before."

The divergence in Fed and ECB policy was supposed to be bullish for the dollar, given it had widened the premium offered by U.S. two-year yields over German yields to 256 basis points from 188 basis points this time last year.

The last time the spread was that plump was in 1999.

Yet the euro is currently up 12 percent on the dollar this year, while the dollar is down 8 percent on a basket of currencies - an indication interest rate differentials aren't everything in forex.

The dollar was idling at 113.42 yen, just off a one-month top of 113.69, while the index that measures it against a basket of peers was down 0.1 percent.

Dealers at Citi noted interbank volumes in the forex market had been 35 percent below average overnight and another thin session was in prospect for Tuesday.

There was a little more action in bitcoin, which was last up over half a percent on the day at $16,540 on the Bitstamp exchange. The cryptocurrency's newly launched 1-month futures contract fell 4 percent to stand at $17,780 on its second day of trading.

Gold remained out of favour at $1,243.24 an ounce having suffered its biggest weekly drop since May last week.

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

(Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in SYDNEY, Alex Lawler in LONDON; Editing by Jeremy Gaunt)