NEW YORK (Reuters) - The dollar fell and global equity markets retreated from fresh highs on Friday, as signs of renewed U.S.-Iranian tensions scuttled a rally triggered by a U.S. labor report showing a strong economy despite slowing job growth in December.

FILE PHOTO: A trader works at the New York Stock Exchange (NYSE) in New York, U.S., January 2, 2020. REUTERS/Bryan R Smith

The United States said it was imposing additional sanctions on Iran as a result of its missile attack on U.S. troops in Iraq this week, and Washington rebuffed an Iraqi request to pull out its troops.

Iraq appears set to bear the brunt of any further violence between neighboring Iran and the United States, sparked by the U.S. killing of Qassem Soleimani, Iran’s top general, in a drone strike on Jan. 3. Iran’s firing of missiles at U.S. forces in Iraq on Wednesday was in response to the general’s killing.

A gauge of equity performance in 49 countries and the major Wall Street indexes hit records in early trade after the Labor Department’s jobs report showed the pace of hiring last month was sufficient to keep the U.S. economic expansion on track.

But stock markets later slid as investors eyed the longer-term risks of Middle East conflict. The dollar fell from four-week highs against the safe-haven yen and slid versus the Swiss franc, another safe haven.

“The fact that the U.S. is still sort of acting aggressively toward Iran and still taking a hard line helped create demand for safe havens,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

MSCI's all-country world index .MIWD00000PUS shed 0.03%, paring an early advance that lifted it to an all-time high.

Stocks on Wall Street retreated after the Dow Industrials earlier crossed the 29,000 mark for the first time, helped by gains in technology and healthcare stocks.

The Dow Jones Industrial Average .DJI fell 133.13 points, or 0.46%, to 28,823.77, the S&P 500 .SPX lost 9.35 points, or 0.29%, to 3,265.35 and the Nasdaq Composite .IXIC dropped 24.57 points, or 0.27%, to 9,178.86.

European shares also retreated. The pan-European STOXX 600 index .STOXX lost 0.12% and Germany's DAX .GDAXI fell 0.09%, while Britain's FTSE 100 .FTSE closed down 0.14%.

The Labor Department said the U.S. jobless rate held steady at near a 50-year low of 3.5% last month and nonfarm payrolls increased by 145,000 jobs, above the 100,000 mark needed to keep up with population growth but below expectations.

A Reuters poll showed the market expected job growth of 164,000.

“When you strip away some of the ‘headline stuff,’ the guts of the report were really quite constructive if you were building the case for a consumer that’s going to continue to chug along,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York.

The soft U.S. payrolls number, following a batch of strong economic figures, was unlikely to sway the Federal Reserve from its current neutral stance on rates, analysts said.

“The economy continues to grow and there’s an absence of inflation pressure, and that’s positive for stocks and bonds,” said Joseph LaVorgna, chief economist for the Americas at French bank Natixis in New York.

The dollar index .DXY fell 0.09%, with the euro EUR= up 0.13% to $1.1119. The Japanese yen JPY= strengthened 0.03% versus the greenback at 109.49 per dollar.

MSCI's emerging market currency index .MIEM00000CUS, was little changed on Friday after hitting a 1-1/2-year high on Thursday, but was still likely to post its sixth straight week of gains.

Oil fell below $65 a barrel in its first weekly loss since late November, erasing the week’s risk premium sparked by Soleimani’s killing as investors focused on rising U.S. inventories and other signs of ample supply.

Worries over the longer-term risks of conflict could potentially push prices higher, however.

Brent crude LCOc1, the global benchmark, slid 39 cents to settle at $64.98 a barrel, its first weekly decline in six weeks. West Texas Intermediate crude CLc1 settled down 52 cents to $59.04.

U.S. gold futures GCv1 settled up 0.4% at $1,560.1 an ounce.