GLOBAL MARKETS-Asia markets stabilise, dollar droops following Middle East truce

By Kevin Buckland

TOKYO, June 25 (Reuters) - Asian stocks stabilised on Wednesday as crude oil hovered near multi-week lows as a ceasefire between Israel and Iran buoyed sentiment, even as hostilities threatened to flare up again.

The dollar wallowed close to an almost four-year trough versus the euro with two-year U.S. Treasury yields sagging to 1 1/2-month lows as lower oil prices reduced the risk to bonds from an inflation shock.

The shaky truce has so far held, although Israel says it will respond forcefully to Iranian missile strikes that came after U.S. President Donald Trump had announced an end to the hostilities.

In addition, U.S. airstrikes did not destroy Iran's nuclear capability and only set it back by a few months, according to a preliminary U.S. intelligence assessment, contradicting Trump's earlier comments that Iran's nuclear programme had been "obliterated".

Japan's Nikkei .N225 and Australia's stock benchmark .AXJO were flat, while Taiwan's index .TWII gained 1%.

Hong Kong's Hang Seng .HSI rose 0.6% and mainland Chinese blue chips .CSI300 eased 0.1%.

U.S. stock futures EScv1 were little changed.

An MSCI index of global stocks .MIWD00000PUS held steady after climbing to a record high overnight.

Brent crude LCOc1 ticked up 81 cents to $67.95 per barrel, bouncing a bit following a plunge of as much as $14.58 over the previous two sessions. U.S. West Texas Intermediate crude CLc1 added 70 cents to $65.07 per barrel.

"Despite the cease fire between Israel and Iran appearing somewhat tenuous, the markets are shrugging it off," said Kyle Rodda, senior financial markets analyst at Capital.com.

"Realistically, the markets don't care if a limited conflict comprised of mostly air strikes continues between the two countries," he said. "It's the prospect of a broader war, with deeper US intervention and an Iranian blockade of the Strait of Hormuz that really matters. And for now, the risks of that seem low."

The two-year U.S. Treasury yield US2YT=RR dipped to the lowest since May 8 at 3.787%.

The U.S. dollar index =USD, which measures the currency against six major counterparts, slipped 0.1% to 97.854.

The dollar slipped 0.1% to 144.70 yen JPY=EBS.

The euro EUR=EBS added 0.1% to $1.1625, edging back towards the overnight high of $1.1641, a level not seen since October 2021.

Federal Reserve Chair Jerome Powell said on Tuesday that higher tariffs could begin raising inflation this summer, a period that will be key to the U.S. central bank considering possible interest rate cuts. Powell spoke at a hearing before the House Financial Services Committee.

Data showed that U.S. consumer confidence unexpectedly deteriorated in June, signalling softening labour market conditions.

Markets continue to price in a roughly 18% chance that the Fed will cut rates in July, according to the CME FedWatch tool.