* TSX down 0.2%

* Oil prices climb over 3%

* U.S. CPI increased 0.6% in April

(Updates prices and details throughout)

By Tharuniyaa Lakshmi

May 12 (Reuters) - Canada's main stock index dipped on

Tuesday, as a surge in oil prices driven by an impasse in the

U.S.-Iran peace talks weighed on investor sentiment.

At 10:45 a.m. ET, the Toronto Stock Exchange's S&P/TSX

composite index was down 0.2% at 34,047.97 points

after two straight days of gains.

U.S. President Donald Trump said a ceasefire with Iran was

"on life support" following Tehran's rejection of a U.S.

proposal to end their conflict.

Oil prices rose more than 3% as stark

differences between Tehran and Washington on the peace proposal

brought supply concerns again to the fore.

Canada's oil stocks jumped 1.1%, though several

subsectors including technology and healthcare

came under pressure.

Investors fear that surging energy prices will feed into

inflation and slow economic growth even though commodity-heavy

Canadian stock markets have remained relatively insulated from

the impact of the war.

"The Canadian market had been expecting the central bank to

continue cutting rates. Instead, they've paused and the risk now

is that they may need to raise rates," said Shiraz Ahmed,

founder at Sartorial Wealth.

"If they start doing a raising cycle, then that is

definitely a concern."

Wall Street stocks fell after data showed U.S. consumer

prices rose at a brisk clip for a second straight month in

April, resulting in the largest annual increase in inflation in

nearly three years and bolstering expectations the Federal

Reserve would keep interest rates unchanged for a while.

On the domestic earnings front, Pet Valu ( PTVLF ) fell 14.1%

to a record low and to the bottom of the benchmark index after

the pet food retailer's first-quarter profit fell on higher

operating costs.

Paramount Resources rose 3.9% after the oil and gas

producer lifted its full-year output guidance.