April 15 (Reuters) - U.S. economic activity increased and employment was steady in recent weeks, the Federal Reserve said on Wednesday in a report that also pointed to notable impacts from a surge in energy prices amid the ongoing Iran war.

"The conflict in the Middle East was cited as a major source of uncertainty that complicated decision-making around hiring, pricing, and capital investment, with many firms adopting a wait-and-see posture," the U.S. central bank said in its latest "Beige Book" report, a roundup of qualitative economic data from across the country that policymakers use to help inform their understanding of the economy and their interest rate decisions.

"Business outlooks varied amid widespread uncertainty about future conditions," it said.

The Fed is expected to leave its benchmark overnight interest rate on hold in the current 3.50%-3.75% range at its next policy meeting on April 28-29.

Price growth "mostly remained moderate overall," according to the report, which draws on surveys of and interviews with business leaders and community organizations across all 12 of the Fed's districts. Higher energy costs mean more expensive shipping and higher costs for plastics and fertilizers, the report said, adding that "input cost pressures beyond energy-related increases also were widespread.

The information in the latest report was gathered on or before April 6 and captures the unsettled economic mood since Iran's closure of the Strait of Hormuz disrupted shipments of about a fifth of the world's oil shipments and about a third of its fertilizer shipments.

The average price of gasoline in the U.S. has jumped to more than $4 a gallon, retail diesel prices have surged to more than $5.60 a gallon and fertilizer prices also have risen sharply.

The prior Beige Book, which reported overall optimistic expectations for economic growth and an expectation that the pace of price increases would slow, was completed before the latest hostilities in the Middle East began on February 28.

INFLATION OUTLOOK

Fed policymakers say they typically "look through" temporary increases in commodity prices, and many say they still expect goods inflation from last year's tariff shocks to ease later this year, a development that would allow them to resume cutting interest rates.

At the same time, inflation has been running above the Fed's 2% goal for more than five years. The latest data has economists estimating a jump last month not only in headline inflation but also "core" inflation, which excludes energy and food prices, that policymakers use to gauge future inflationary pressures.

Policymakers largely see the U.S. labor market as stabilizing, with slowing job growth balanced by a shrinking workforce amid a sharp decline in immigration.

Unemployment ticked down last month to 4.3%.

The Beige Book noted that wage competition overall remained "muted," suggesting the labor market was not adding to inflationary pressures.