MIDEAST STOCKS-Major Gulf equities retreat on US-Iran caution

Feb 17 (Reuters) - Major stock markets in the Gulf slipped in early trade on Tuesday as investors were cautious ahead of U.S.–Iran nuclear talks, while Iran conducted naval drills near the Strait of Hormuz.

Saudi Arabia's benchmark index .TASI dropped 0.9%, with Al Rajhi Bank 1120.SE losing 1.1% and Saudi Arabian Mining Company 1211.SE retreating 3.3%.

Oil giant Saudi Aramco 2222.SE was down 0.4%.

Crude prices - a catalyst for the Gulf's financial markets - edged lower ahead of U.S.-Iran talks aimed at de-escalating tensions against a backdrop of expected OPEC+ supply increases.

Iran began a military drill on Monday in the Strait of Hormuz, a critical international shipping lane and key oil export route for Gulf Arab states, which have been urging a diplomatic solution to end the long-running dispute.

On Monday, U.S. President Donald Trump said he would take an "indirect" role in the Geneva talks, adding that he thinks Tehran wants to reach an agreement. Over the weekend, he said regime change in Iran "would be the best thing that could happen."

Meanwhile, the U.S. military is making preparations for the possibility of weeks-long operations against Iran if President Donald Trump orders an attack, Reuters reported on Saturday, citing two U.S. officials.

Dubai's main share index .DFMGI was down 0.4%, hit by a 2% slide in sharia-compliant lender Dubai Islamic Bank DISB.DU.

In Abu Dhabi, the index .FTFADGI was down 0.3%.

The Qatari index .QSI declined 1%, dragged down by a 2.6% fall in the Gulf's biggest lender by assets Qatar National Bank QNBK.QA.