The dollar rebounded from three-year lows and U.S. crude slid more than 1 percent on Monday on the back of news that a U.S.-led operation killed Osama bin Laden in Pakistan.

U.S. stock index futures added to gains, while U.S. Treasury yields rose across the curve after U.S. officials said the body of Al Qaeda's elusive leader has been recovered by U.S. authorities.

By lowering national security risks overall, this is likely to bolster equity markets and lower US Treasury prices in a reverse flight to quality movement, said Mohamed El-Erian, Chief Executive Officer and Co-Chief Investment Officer at PIMCO, which oversees $1.2 trillion assets.

Oil markets are likely to be the most volatile given their higher sensitivity to the tug of war between lower risk overall and the possibility of isolated disturbances in some parts of the Middle East and central Asia, he said.

U.S. crude fell 1.3 percent to $112.39, while U.S. stock index futures rose 0.9 percent.

U.S. Treasuries fell, pushing yields higher across the curve. The 10-year yield climbed 2.4 basis points to 3.314 percent.

Earlier, a 10 percent slide in silver highlighted worries that other overbought assets may be vulnerable to sudden sell-offs.

Financial markets in China, Hong Kong, Singapore, Malaysia and Thailand were all shut on Monday for public holidays, a factor seen contributing to thin trading conditions that could exaggerate price action.

Japan's Nikkei average .N225 rose 1.0 percent, South Korea's KOSPI .KS11 put on 0.9 percent, but Australia's S&P/ASX 200 index .AXJO slipped 0.5 percent.

MSCI's gauge of Asian stocks excluding Japan .MIAPJ0000PUS struggled to make further gains, having reached a three-year peak last week. It was up 0.08 percent at 506.62.

Silver skidded about 10 percent to a low of $42.58, well off a record high of $49.51 set on Thursday. Gold fell to $1,546 from an all-time high of $1,575.79.

If adjustment is confined to just silver, it won't be a big deal, said Koji Fukaya, chief strategist at Credit Suisse in Tokyo.

But if this moves spills over to other commodities, that could certainly hurt commodity currencies, such as the Australian dollar and the Canadian dollar. And we could see a rebound in the U.S. dollar.

DOLLAR DOLDRUMS

The U.S. dollar fell to a fresh three-year low against a bakset of major currencies as investors sought higher-yielding assets with the U.S. central bank in no hurry to tighten its ultra-loose monetary policy.

This has helped the high-flying Australian dollar extend gains to a fresh 29-year high above $1.1000. The euro held near a 16-month high around $1.4881 set last week.

With both the Federal Reserve and Bank of Japan maintaining ultra-loose monetary policies, investors have been seeking higher yielding assets in many fast-growing emerging markets in Asia.

This has prompted many Asian authorities to tighten policy as inflationary pressure grows. Data on Sunday showed China's policy actions to rein in prices appeared to be taking effect, with manufacturing growth slowing in April.

Obama: 'Justice has been done'

Osama bin Laden killed in a mansion outside the Pakistani capital Islamabad

It's official: Osama bin-Laden is dead, says Obama

Osama Bin Laden Dead - UPDATES (LIVE BLOG)

U.S. Forces Kill Osama Bin Laden in Pakistan, Body Recovered