* Investors watch oil prices, interest rates, Iran

headlines

* Jefferies gains on report Japan's SMFG plans possible

takeover

* Barclays raises year-end target for S&P 500 to 7,650

from 7,400

* Ares Management ( ARES ), Apollo Global limit redemptions at

funds

(Updates with preliminary closing prices)

By Sinéad Carew and Purvi Agarwal

March 24 (Reuters) - Wall Street indexes fell in

Tuesday's volatile session as investors swayed between fears of

rising oil prices and hopes for a resolution to the U.S.-Israeli

war on Iran as U.S. President Trump claimed there were talks

even as reports suggested that more American troops were headed

to the Middle East.

U.S. Treasury yields extended gains after a weak auction of

2-year Treasury notes, also adding pressure to equity markets.

Indexes regained some ground after Trump told reporters that

the United States was talking to "the right people" in Iran in

order to reach an agreement to end hostilities and that Iran has

agreed they will never have nuclear weapons. But reports the

Pentagon would send thousands of more troops from the elite 82nd

Airborne Division to the Middle East caused some concerns.

Wall Street indexes on Monday had marked their biggest

one-day gain since February 6 ]as oil prices fell after Trump

had postponed strikes against Iranian power plants and announced

talks with Iran even as Tehran denied negotiations with the U.S.

But energy prices rose on Tuesday with crude oil futures

settling up more than 4%.

"Stocks are trying to find their footing as investors are

keeping one eye on social media and the other eye on every

headline. We're very short-term oriented," said Carol Schleif,

chief market strategist, BMO Private Wealth.

"Markets are trying to hold onto the optimism they had

yesterday. They're so ready to move beyond war talk even if it's

not 100% settled," said Schleif but she added, "There's a lot of

nervousness. People are watching oil and watching interest rates

and worrying do we go higher for longer on both energy and

interest rates because that could start negatively impacting

growth."

Kevin Gordon, head of macro research & strategy at the

Schwab Center for Financial Research in New York also pointed to

a "double whammy" higher oil prices and higher rates as a

"stagflationary backdrop, which, needless to say, is not a

positive backdrop for the stock market."

According to preliminary data, the S&P 500 lost 24.62

points, or 0.36%, to end at 6,557.19 points, while the Nasdaq

Composite lost 184.86 points, or 0.84%, to 21,762.77.

The Dow Jones Industrial Average fell 87.24 points, or

0.19%, to 46,121.23.

Among the 11 S&P 500 major industry sectors, energy

led gains during the session while communication services

and technology were leading losses.

Meanwhile, private credit concerns resurfaced after a report

that Ares Management ( ARES ) limited redemptions at 5% at its

private credit fund, along with Apollo Global Management ( APO )

, as withdrawal requests surged.

Earlier a survey showed U.S. business activity slowed to an

11-month low in March as the Middle East war raised prices for

energy products and other inputs.

Higher oil prices have revived inflation jitters and

complicated the interest rate outlook for central banks. The

U.S. Federal Reserve struck a hawkish tone last week, projecting

only one reduction in 2026.

Traders are no longer pricing in any rate cuts this year,

compared with two reductions expected before the Middle East

conflict erupted. Expectations for hikes nudged higher amid

escalating tensions last week, but were quickly unwound after

Trump's comments on Monday, according to CME's FedWatch Tool.

Among individual movers, shares of Jefferies rose after

the Financial Times reported that Japan's Sumitomo Mitsui

Financial Group ( SMFG ) is working on plans for a possible

takeover of the investment bank.

Shares in cosmetics maker Estee Lauder ( EL ) tumbled after it

said it was in talks for a potential merger with Spanish beauty

group Puig Brands.

Barclays lifted its 2026 year-end target for the S&P 500 index

to 7,650 from 7,400, citing stronger earnings

expectations that outweigh macro risks like Middle East

tensions, AI-driven disruption and stress in private credit.