* Indexes down: Dow 0.66%, S&P 500 0.70%, Nasdaq 1.10%

* Unity Software's ( U ) shares climb after preliminary Q1

results

* Carnival Corp ( CCL ) drops on cutting annual adjusted profit

forecast

(Updates with late-morning trading)

By Purvi Agarwal and Twesha Dikshit

March 27 (Reuters) - The S&P 500 and the Nasdaq dropped

to their lowest levels in more than six months on Friday, with

technology stocks leading declines, as the month-long Middle

East war weighed on investor sentiment.

U.S. President Donald Trump gave Iran another 10 days to

reopen the Strait of Hormuz or face the destruction of its

energy plants, after Iran rejected his proposals to end the war

he launched together with Israel.

The postponement did not calm markets as investors were

skeptical about the two sides reaching an agreement. Oil prices

gained more than 2%.

The S&P 500 and the Nasdaq stayed on track for their fifth

week of losses, while the Dow was set to end the week little

changed.

"What you're talking about here is a level of uncertainty in

the extreme... The fog of war has been much denser than in any

conflict going back 50-60 years," said Bill Mann, chief

investment strategist, Motley Fool Asset Management.

The CBOE Volatility Index, considered Wall Street's

fear gauge, was up 1.57 points at 29.01.

At 11:40 a.m. ET, the Dow Jones Industrial Average

fell 305.57 points, or 0.66%, to 45,651.29, the S&P 500

was down 45.10 points, or 0.70%, to 6,432.06, and the Nasdaq

Composite lost 236.47 points, or 1.10%, to 21,171.61.

The S&P 500technology sector was the biggest

loser, down 0.9%, with Nvidia ( NVDA ) and Microsoft ( MSFT )

shedding 1% and 1.7%, respectively.

Software shares came under renewed selling pressure with the

iShares Expanded Tech-Software sector ETF falling 3.4%

to a more than one-month low.

A 1.1% loss for Alphabet and a 3.5% decline in

Meta Platforms' ( META ) shares weighed on the S&P 500

communication services index, which shed 1.3%.

"Certain components of the market have been hit really hard.

And a lot of that has to do with the fact that we're not sure

who's a beneficiary from AI and who is going to be consumed by

AI," said Mann.

Consumer discretionary stocks lost 2%.

Cruise-operator Carnival Corp ( CCL ) was down about 4% after

cutting its annual adjusted profit forecast.

On Thursday, the Nasdaq ended more than 10% lower from its

record close, confirming it had been in correction territory.

The Russell 2000, which was the first on the correction

path, confirmed it last Friday.

The surge in oil prices as a result of the Iran war has

brought inflation fears to the forefront, complicating the

future rate-cut path for central banks.

Money market participants are not pricing in any easing from

the U.S. Federal Reserve this year, compared with two cuts

anticipated before the conflict broke out, according to CME's

FedWatch Group. Expectations of a rate hike in December last

stood at 32%.

U.S. consumer sentiment eased to a three-month low in March,

raising concerns about the economy due to the Middle East war.

Philadelphia Fed President Anna Paulson acknowledged the

risks to the economy from the war, but did not specify what it

meant for monetary policy in the near term.

Unity Software's ( U ) shares jumped 10.5% after the maker

of videogame software reported first-quarter preliminary revenue

above analysts' estimates.

Declining issues outnumbered advancers by a 1.85-to-1 ratio

on the NYSE and by a 2.5-to-1 ratio on the Nasdaq.

The S&P 500 posted 21 new 52-week highs and 16 new lows,

while the Nasdaq Composite recorded 21 new highs and 262 new

lows.