By Kevin Buckland

TOKYO (Reuters) - Crude oil hovered above $90 a barrel while equities were weak and the safe-haven dollar was firm on Monday as investors nervously watched for whether escalating violence in Gaza would cause the conflict to spread beyond Israel and Hamas.

Israel's shekel sank to a nearly eight-year low, after the country's prime minister, Benjamin Netanyahu, vowed to "demolish Hamas" in retaliation for the rampage on Oct. 7 that killed 1,300 people in the worst attack on civilians in Israel's history.

U.S. Secretary of State Antony Blinken is visiting the region, seeking to prevent further escalation. Netanyahu agreed to lift a blockade of water supplies to parts of southern Gaza after speaking with U.S. President Joe Biden.

Brent crude futures reached a new recent high of $91.20 on Monday before easing back slightly to $90.84, following Friday's 5.7% surge.

Japan's Nikkei share average fell more than 1%, while Australia's S&P/ASX 200 index lost 0.15% in early trading. New Zealand's equity benchmark slid 0.9%.

On Friday, the pan-European STOXX 600 index lost 0.98 and New York's S&P 500 declined 0.50%, although U.S. stock futures pointed 0.18% higher on Monday.

"The situation is dynamic and it's too early to say if the hedges placed on Friday are unwarranted, but there have been pockets of positive news flow," Chris Weston, head of research at Pepperstone, wrote in a note, citing the resumption of water supplies as one example.

"Risk and energy markets will look for headlines and actions from Iranian officials who have stated they have a duty to come to the aid of the Palestinians."

Benchmark 10-year U.S. Treasury yields were little changed at 4.6434%, following a more than 8 basis point decline on Friday amid demand for the safety of bonds.

Currencies overall retraced some of their moves from the end of the week, with the U.S. dollar index easing slightly to 106.55 from as high as 106.79 on Friday.

The euro rose 0.1% to $1.0522 while the yen was little changed at 149.505 per dollar.

However, Israel's shekel was weaker, last trading at 3.9850 per dollar after weakening to 3.9900 earlier in the day for the first time since April 2015.