GLOBAL MARKETS-Wall Street edges lower, oil climbs as Middle East conflict grinds on

By Isla Binnie

NEW YORK, June 17 (Reuters) - Wall Street indexes edged lower and oil kept climbing on Tuesday as U.S. President Donald Trump left the Group of Seven summit early and investors awaited a series of interest rate decisions by major central banks this week.

Trump returned to Washington a day before the summit ends as the Israel-Iran conflict intensified, saying U.S. patience was wearing thin but he would not kill Iran's leader "for now."

The news nixed market hopes for more progress at the summit on issues like the sweeping tariffs Trump has promised to impose on many allies.

"The market was anxious to hopefully hear updates on trade agreements out of the G7 and the news of Trump leaving early was disappointing, although we all know why," said Eric Sterner, chief investment officer at Apollon Wealth Management.

"The market is paying attention to the (Middle East) conflict but it feels that's contained to those two countries," Sterner said. "It does cause concern, especially if Iran does anything with the Strait of Hormuz," he added, noting around 20% of the world's oil supply passes through that waterway.

U.S. crude CLc1 continued to surge and settled 4.46% higher at $74.97 a barrel, while Brent LCOc1 rose to $76.54 per barrel, up 4.52% on the day.

Stocks stayed under pressure, with the Dow Jones Industrial Average .DJI extending losses to 0.78% on the day. The S&P 500 .SPX fell 0.84% and the Nasdaq Composite shed 0.92%.

No disruptions to crude supply have been reported, although news of a collision between two ships in the Gulf of Oman sent another brief jolt through the oil market overnight.

Analysts noted that the VIX volatility index .VIX has risen in the last week, but at around 21 it is well below April's highs above 60 and nowhere near the records, above 80, hit during the 2008 financial crisis.

"This is happening at a point in time where we are less sensitive, first of all the fact being that oil prices are still down year to date, and secondly the macro economy is ... showing that financial markets are relatively resilient at the moment," Bjarne Breinholt Thomsen, head of cross asset strategy at Danske Bank, said in a webinar on Tuesday.

Stocks in Europe also sagged. The STOXX 600 .STOXX closed around its lowest in three weeks.

CENTRAL BANKS LOOM

Investors awaited meetings this week by the Federal Reserve, Bank of England and Swiss National Bank. The Bank of Japan left short-term interest rates unchanged on Tuesday, at 0.5% as expected.

U.S. Treasury yields fell ahead of the Fed's scheduled update, which is widely expected to produce no immediate change in interest rates.

But market participants will be monitoring new projections on how Trump's tariffs could affect growth and inflation. Traders are pricing in two cuts by the end of the year. 0#USDIRPR

They are also tuning in to comments from Chair Jerome Powell, who Trump has repeatedly criticized for not lowering interest rates.

"One thing that settled the markets earlier this year was the independence of the Fed and the fact they would not be influenced, but data-driven," said Matt Rubin, chief investment officer at Richmond, Virginia-based Cary Street Partners.

"Jerome Powell is going to continue to express that they are focused on data at this point, and that data does not warrant a cut."

The U.S. 10-year note US10YT=RR last yielded 4.385%, 6.9 basis points down from 4.454% late on Monday.