* US central bank expected to hold rates steady on

Wednesday

* Investors look to updated economic projections, view of

Middle East fallout

* Surging oil prices in focus as inflation pressure point

By Lewis Krauskopf

NEW YORK, March 13 (Reuters) - Investors will seek

clarity in the coming week on how much the Middle East conflict

is complicating expectations for interest-rate cuts this year,

as they brace for developments in the Iran war that could rattle

markets.

U.S. Federal Reserve policymakers meet for the first time

since the U.S. and Israel began air strikes on Iran about two

weeks ago, setting off a surge in oil prices that has

reverberated across assets.

Fed members will grapple in their two-day meeting with

questions about the energy shock's impact on inflation and

economic growth. The central bank will release economic

projections on Wednesday. Markets are now pricing in tempered

hopes for rate cuts in the wake of the conflict, even as

expected cuts have been a key source of optimism for bullish

stock investors this year.

"The Fed is going to be front and center, especially given

the fact that we have seen the market push back... these rate

cut expectations," said Angelo Kourkafas, senior global

investment strategist at Edward Jones.

U.S. stock indexes have fallen and equity volatility has

ratcheted higher since the Iran war began. Investors are fixated

on the massive moves in oil prices, with U.S. crude

soaring close to $120 a barrel to start the week, and settling

on Friday near the closely watched $100 level. Iran said the

world should be ready for oil at $200 as its forces hit merchant

ships during the week.

The benchmark S&P 500 ended on Friday, down about 5%

from its record closing high from late January, as it posted its

third straight weekly decline.

"We're seeing wild swings in the market as traders are

latching on to any hint of developments, positive or negative,

on the Iran conflict," said Sid Vaidya, chief investment

strategist at TD Wealth.

FED ON HOLD FOR LONGER?

The Fed is widely expected to hold interest rates steady for

a second straight meeting when it gives its policy statement on

Wednesday. The central bank lowered rates last year to shore up

a weakening labor market, but paused its easing cycle in January

as it noted risks to employment and inflation had diminished.

Investors have been assuming more rate cuts are coming this

year, which would be expected to support prices for stocks and

other assets. Those expectations have been dialed back due to

fears that the surge in energy prices will push up inflation.

"We believe this will just keep the Fed in a holding pattern

for longer," Vaidya said.

At the same time, a surprisingly weak jobs report for February

could encourage the Fed to maintain a bias toward easing.

Fed funds futures on Friday were pricing in slightly less

than one standard quarter-percentage point cut by December, down

from two such cuts as of late February before the war began,

according to LSEG data.

FED PROJECTIONS, POWELL COMMENTS IN FOCUS

As part of its meeting, the Fed will release updated

projections from policymakers on their future expectations for

rates, as well as for inflation and the labor market. Fed Chair

Jerome Powell's press conference on Wednesday, following the

central bank's policy statement, also could shed light on how

Fed members are viewing the impact of the conflict.

"I think it's going to set the table for the year and how to

look at inflation being induced by oil prices," said Paul Nolte,

senior wealth adviser and market strategist at Murphy & Sylvest

Wealth Management.

For Powell, it will be his second-to-last meeting before his

term as chair expires in May. The next rate move may not come

until President Donald Trump's nominee for Fed chair, former Fed

Governor Kevin Warsh, is expected to have taken over the helm of

the central bank.

In the coming week, Nvidia's ( NVDA ) annual developer

conference also could bring renewed focus to the

artificial-intelligence trade, which sparked volatility for

technology and other shares earlier in the year.

But investors expect Iran-related news will remain

prominent.

"Headlines continue to drive market movements as investors

wait for greater clarity on the timing of a U.S. exit strategy,"

Adam Turnquist, chief technical strategist for LPL Financial,

said in a written commentary on Thursday.