* World equity markets extend decline for seventh day
* Debt crisis sends euro zone back into recession
* Middle East tensions support oil prices, Brent hits $111
* Yen sinks to 6-1/2-month low vs U.S. dollar
By Herbert Lash
NEW YORK, Nov 15 (Reuters) - Global stocks fell for a seventh day on Thursday after data showed the euro zone entered a recession in the third quarter and on fear of the U.S. "fiscal cliff," while oil prices gained on growing concerns about violence in the Gaza Strip.
Brent crude oil prices rose toward $111 a barrel as fighting in the Gaza Strip sparked worries of an escalation in fighting that could ultimately disrupt oil supplies from the Middle East.
Hamas fired dozens of rockets into southern Israel, killing three, and Israel launched numerous air strikes across the Gaza Strip as the military showdown lurched closer to all-out war.
Benchmark Brent crude rose $1.08 to $110.69 a barrel.
"I have a hard time seeing (prices) falling back much at the moment, at least while tension is still high," said Filip Petersson, an analyst at SEB in Stockholm.
"We would probably need to hear some kind of statements that indicate the Israelis are stepping down, but I think that's unlikely to happen at the moment."
The yen tumbled to its lowest level against the U.S. dollar since late April after the leader of Japan's main opposition party called for a move toward negative interest rates, sapping the currency's appeal despite its safe-haven status.
Against the yen, the dollar was up 1.02 percent at 81.06.
U.S. stocks fell in choppy trading, with the S&P 500 down for a third day after Wal-Mart Stores Inc, the world's biggest retailer, reported disappointing quarterly sales and on concerns about the fiscal cliff and Europe's debt crisis.
Stocks have struggled to hold on to small gains in recent days as investors fret the economy could slip into recession if no budget deal is reached to avoid the fiscal cliff - some $600 billion in spending cuts and tax hikes that take effect in January.
The S&P 500 is off about 2 percent for the week so far.
The Dow Jones industrial average was down 59.67 points, or 0.47 percent, at 12,511.28. The Standard & Poor's 500 Index was down 6.45 points, or 0.48 percent, at 1,349.04. The Nasdaq Composite Index was down 17.41 points, or 0.61 percent, at 2,829.40.
Shares of Wal-Mart fell 3.7 percent to $68.68 after the retailer reported quarterly sales rose 3.4 percent, below analysts' expectations, as it cited weakness in China and Japan, as well as in the United States.
Disappointing economic data also weighed on stocks and U.S. oil prices, which fell 60 cents to $85.72 a barrel.
Superstorm Sandy drove new claims for U.S. jobless benefits to a 1-1/2 year high last week, a sign the deadly storm could hold back economic growth by leaving tens of thousands of people temporarily out of work.
A drop in the Philadelphia Federal Reserve's index of business activity in the U.S. mid-Atlantic region was also tied to the impact of Sandy, which disrupted business in the area due to power outages and commuting problems for workers.
In Europe, stocks ended lower, with a key index hitting a two-month low on the economic data.
The FTSEurofirst 300 index of top European shares unofficially closed 0.9 percent lower at 1,078.64 points, a level not seen since early September.
"The global economy faces some severe headwinds. Against that backdrop we see short-term de-risking of portfolios," said Abi Oladimeji, head of investment strategy at Thomas Miller Investment.
Economic growth in Germany, Europe's largest economy, cooled to 0.2 percent over the July-September period compared with the previous three months, while data showed the wider 17-nation euro zone has slipped back into recession.
Economic output in the euro area fell 0.1 percent in the third quarter after falling 0.2 percent in the April to June period, making it the second recession since 2009.
"The double-dip is a fact," said Martin Van Vliet, an economist at ING Bank. "What you notice is that the recession in southern Europe is slowly creeping to other countries."
World stocks were on course for a seventh successive day of losses. MSCI's world equity index fell 0.52 percent at 316.97 points and has now lost over 3.0 percent this month.
The euro rallied to a two-week high against the yen and also rose against the dollar, despite the gloomy economic data for the euro zone.
The euro was up 0.38 percent at $1.2782 from a previous session close of $1.2734.
The benchmark U.S. Treasury 10-year note was up 3/32 in price to yield 1.5775 percent.