NEW YORK, March 20 (Reuters) - A Middle East crisis that has convulsed markets should remain the focal point for Wall Street in the near term, as investors stay glued to developments in Iran and the fallout from surging energy prices.

As the U.S.-Israeli war on Iran stretches to three weeks, an over 40% jump in oil prices has driven worries about higher inflation and stagnating economic growth.

Inflationary concerns were prompting markets nearly to rule out any equity-friendly interest rate cuts this year that investors had previously counted on. Federal Reserve Chair Jerome Powell expressed deep uncertainty at the U.S. central bank's meeting on Wednesday about how the crisis would factor into the economy, muddying its ability to forecast conditions ahead.

The benchmark S&P 500 stock index was set for its fourth straight weekly decline. Middle East tensions escalated this week, as Iran attacked energy facilities across the region following Israel's strike on its gas field.

"This is a situation that's so fluid," said Chris Fasciano, chief market strategist at Commonwealth Financial Network. "We could have a resolution in the next week or it could go on for some time. And the longer it goes on, you start to think about the impacts it could have on the U.S. economy."

WATCHING OIL, STOCKS' 'ORDERLY' REACTION

Swings in crude prices have rippled through asset classes. U.S. crude reached $100 a barrel on Thursday, while Brent was hovering at $110. In addition to the attacks on energy infrastructure, traffic has stalled in the Strait of Hormuz, through which around a fifth of the world's crude oil and liquefied natural gas normally passes.

The 20-day correlation between the S&P 500 and U.S. crude stood at -0.926 as of Thursday morning, according to LSEG data, a strong inverse relationship that shows they have been tending to move in opposite directions.

"If you're a trader, you watch oil prices because I do think that that's generally giving the leading indicator as to how the financial markets are viewing the outlook for the conflict," said Eric Kuby, chief investment officer at North Star Investment Management Corp.

The S&P 500 energy sector, which includes shares of oil companies, has gained since crude prices began to spike in late February, but the group accounts for less than a 4% weight in the benchmark index.

The latest declines left the S&P 500 down just over 5% from its record closing high set in late January. The pullback so far mostly lacked the chaotic quality of the abrupt equity slide last April following President Donald Trump's "Liberation Day" tariff announcement that set off broad economic worries, Fasciano said.

"This has been fairly orderly, which I think is an encouraging sign," Fasciano said. "And I think it's because the underlying fundamentals for corporate America are still fairly robust and are offering some support."

TREASURY YIELDS, MARKET TECHNICALS ALSO IN FOCUS

Fast-climbing Treasury yields, driven higher by the energy price spike and caution from global central banks, were looming as a risk factor for stocks. The benchmark 10-year Treasury yield hit 4.328% on Thursday, its highest level since August, before paring back.

Keith Lerner, chief investment officer at Truist Advisory Services, said he was watching whether the 10-year Treasury yield sustainably rises above 4.3%, which could increase pressure on stocks.

"Rates going higher means borrowing costs are somewhat higher. And then that could actually slow the economy," Lerner said. "At some point if they keep going higher, then the relative attractiveness of (bond) yields becomes more attractive relative to equities."

Stocks were also near key technical levels. The S&P 500 on Thursday closed at 6,606.49, below its 200-day moving average -- a closely watched long-term trendline -- for the first time since May.

A breakdown below that trendline "especially if followed by a breach of the November lows at 6,522, would raise more serious questions about the staying power of this bull market," Adam Turnquist, chief technical strategist for LPL Financial, said in a note on Thursday.

Reports on manufacturing, services activity and consumer sentiment highlight a relatively light week ahead for U.S. economic data. A major energy conference in Houston that will feature top global industry executives could draw Wall Street's attention.

Events in Iran were likely to loom largest. In a note on Thursday morning, analysts at UBS Global Wealth Management said the latest developments were "pushing markets to price in a higher risk of prolonged conflict, deeper infrastructure damage and higher-for-longer crude prices."

"While a less damaging outcome in the Strait of Hormuz remains possible, recent events have narrowed that path and heightened the risk of continued volatility," the UBS analysts said.