(Updates prices and details throughout)

* TSX up 0.03%

* BoC expected to hold rates steady on Wednesday

* Air Canada ( ACDVF ) slips after reaching tentative labour deal

By Tharuniyaa Lakshmi

July 13 (Reuters) - Canada's main stock index was muted on

Monday as gains in energy stocks, driven by higher oil prices

amid renewed U.S.-Iran hostilities, offset weakness in materials

stocks linked to lower gold prices.

At 10:13 a.m. ET, the Toronto Stock Exchange's S&P/TSX

Composite Index was up 0.03% at 35,313.62 points.

* U.S. and Iranian forces exchanged missile and drone

attacks and clashed over control of the Strait of Hormuz,

casting doubt on the viability of an interim deal to halt their

war and driving oil prices higher.

* Energy stocks rose 2%, tracking higher oil

prices.

* Seven of the TSX's 10 major sectors traded higher, though

materials stocks fell 1.5%, tracking lower gold

prices as inflation concerns reinforced expectations that the

U.S. Federal Reserve could keep interest rates higher for

longer.

* Technology stocks and financials fell

0.4% and 0.1%, respectively.

* Meanwhile, investors await the Bank of Canada policy

decision due Wednesday.

* The Bank of Canada is expected to keep its key policy rate

unchanged at 2.25% on Wednesday, as signs of easing underlying

price pressures give policymakers little reason to raise

borrowing costs, while a rebound in economic growth after a

technical recession reduces the need for any stimulus.

* "The risks are fairly balanced. A weaker economy would

argue for lower interest rates, while inflationary pressures

could warrant higher rates. The Bank of Canada does not have a

clear view on the direction of its next move, which will depend

on factors including developments in the Middle East, trade

negotiations with the United States, inflation and labor market

data. For now, they can afford to remain on hold as long as core

inflation stays around 2%," said Allan Small, senior investment

advisor of the Allan Small Financial Group with iA Private

Wealth.

* Among individual stocks, Air Canada ( ACDVF ) slipped 1.4%

after the airline said it had reached a tentative collective

agreement with the union representing about 11,000 technical

operations, airport, cargo, logistics and supply employees.