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* Futures up: Dow 0.2%, S&P 500 0.2%, Nasdaq 0.4%

July 20 (Reuters) - U.S. stock index futures rose slightly

on Monday, following last week's chip-stocks-led pullback, as

investors awaited a key slate of earnings that could test Wall

Street's AI-driven rally, while caution prevailed due to

escalating tensions in the Middle East.

The second-quarter earnings season will pick up pace this

week, with reports due from several major companies, including

Alphabet, Tesla, Intel ( INTC ) and IBM ( IBM )

.

Alphabet, one of the "Magnificent Seven" megacap stocks, is

also a major AI hyperscaler, spending billions of dollars on

data centers and related infrastructure.

That surge in AI capital spending has been a major driver

behind this year's market gains, lifting semiconductor stocks

and other companies that are seen as the beneficiaries of the

buildout, and helping the major U.S. indexes hit record highs.

Earnings from Intel ( INTC ) and Texas Instruments ( TXN ) will be

closely watched after a powerful rally in chip stocks gave way

to a sharp reversal.

The Philadelphia SE Semiconductor Index ended Friday

more than 20% below its late-June record high, confirming a

bear-market decline.

"If earnings reports in the coming weeks suggest that we

remain in the spend phase of the AI buildout, investors are

likely to get more impatient, and the sell-off could drag on

over the summer months," said Kathleen Brooks, research director

at XTB.

At 05:18 a.m. ET, Dow E-minis were up 106 points, or

0.2%, and S&P 500 E-minis were up 16.5 points, or 0.22%.

Nasdaq 100 E-minis were up 111.75 points, or 0.39%.

The three main U.S. indexes fell sharply last week,

pressured by a steep pullback in high-flying semiconductor

shares. The declines came even as benign inflation data eased

some fears of a Federal Reserve rate increase later this month,

while major U.S. banks kicked off earnings season on a positive

note.

Markets are pricing in about a 12% chance of a quarter-point

rate hike at the Fed's July meeting and a roughly 53% chance of

another hike in September, according to CME's FedWatch tool.

Investors were closely watching the development in the

U.S.-Israeli war with Iran after a recent escalation in the

nearly five-month-old conflict.

U.S. forces struck Iran for a ninth consecutive day on

Monday, raising concerns over shipping through the Strait of

Hormuz.

The renewed tensions have fueled worries that energy prices

could climb back toward levels seen at the start of the war,

reviving inflation concerns.

Earlier in the day, Brent crude rose above $90 a

barrel for the first time since early June.

"The escalations have also eroded the assumption that the

crisis in the Middle East is over and energy prices would

normalize," Brooks said.

(Reporting by Ragini Mathur in Bengaluru)