EU wheat regains ground with Chicago on Middle East war escalation

PARIS, March 18 (Reuters) - Euronext wheat rose on Wednesday, recovering from a two-day fall in step with Chicago futures as the targeting of energy sites in the Gulf increased investor worries about inflation resulting from the U.S.-Israeli war with Iran.

Brent crude LCOc1 jumped around 5% after Iran's Pars gas field was hit, prompting Tehran to announce it would respond with attacks on oil and gas targets across the Gulf. O/R

May milling wheat BL2K6 on Euronext settled 1.1% up at 207.50 euros ($238.67) a metric ton.

The contract earlier touched a new one-week low at 204.00 euros before rebounding.

Chicago wheat Wv1 climbed nearly 3%, with the U.S. market also drawing support from dryness in some wheat zones. GRA/

"Fundamentally, everyone is bearish on wheat because there is wheat everywhere," a futures trader said. "The issue isn't supply, the issue is money flows seeking an inflation hedge and that includes ags."

Financial investors extended their net long position in Euronext wheat last week, data from the exchange showed.

Traders were assessing export competition, with relatively high U.S. prices thought to be a factor in rumoured sales of Polish wheat to the United States and of Russian wheat to Mexico.

“Russian and other Black Sea wheat is now competing as the world’s cheapest major origins against Argentina, with market talk that a shipment of Russian wheat was even bought by Mexico for April or May shipment,” a German trader said.

“There is also talk that two handymax shipments of milling wheat from Poland have been sold recently to a U.S. buyer in Florida.”

A Polish trader added that the U.S. purchases were understood to involve two consignments of new-crop Polish wheat, one for shipment in August and one for October.

Traders said Russian, Ukrainian and Argentine 11.5% protein wheat for April shipment was priced around the same at $231-$234 a ton free on board (FOB). Romanian was about $235-$237 and French around $239-$241 a ton FOB, depending on euro and Euronext moves.

An acceleration in Russian shipments has highlighted strong competition in a well-supplied wheat market, despite rising Russian prices.

Reporting annual results, global crop merchant Louis Dreyfus said it had not yet seen a significant impact from the Middle East war.

($1 = 0.8694 euros)