* MSCI EM FX off 0.1%, stocks up 0.3%

* US plans to extend blockade of Iran, oil extends rally

* Poland says fuel price caps could be extended

* Analysts: Strait of Hormuz reopening key for UAE oil to

move markets

By Purvi Agarwal

April 29 (Reuters) - Most emerging market stocks inched

higher on Wednesday while currencies were subdued as investors

weighed stalled Iran peace talks and awaited the U.S. Federal

Reserve's monetary policy decision later in the day.

MSCI's gauge tracking global EM stocks inched up

0.3%, but was still below its record high hit on Monday.

South Korean stocks were up 0.8%, while Taiwanese

equities lost 0.6%, ahead of quarterly reports from U.S.

tech giants Microsoft ( MSFT ), Alphabet, Meta

and Amazon.com ( AMZN ) after markets close on

Wednesday. The euphoria around the technology has helped many

Asian bourses hit record highs this year.

Caution prevailed ahead of the Fed's monetary policy

decision, where the central bank is widely expected to hold

interest rates steady.

Focus will be on comments from Chair Jerome Powell - whose

term ends next month - on how policymakers will tackle headwinds

from the Iran conflict.

"With talks between the U.S. and Iran stalling and the

Strait of Hormuz still closed, fears of higher-for-longer oil

prices and more hawkish central banks have kept government bond

yields well above pre-conflict levels," said analysts at UBS

Global Wealth Management.

"But markets have overpriced the risk that central banks

will hike, or not cut, interest rates. Policymakers typically

look through supply shocks such as oil spikes."

Most currencies were rangebound as the dollar was largely

flat. Turkey's lira was subdued, while South

Africa's rand was down 0.4%.

Emerging European currencies were muted against the euro,

with MSCI's global EM currency measure off 0.1%.

On the war front, efforts to end the war reached an impasse,

as President Donald Trump remained unhappy with Iran's latest

peace proposal, with the U.S. saying Iran was in a "state of

collapse".

A report said the U.S. was planning to extend its blockade

of Iran, sending oil prices higher.

The conflict had battered global markets and raised concerns

of energy-driven inflation, as shipping through the crucial

waterway was choked.

Many countries capped fuel prices and reduced import duties,

with Poland's finance minister saying measures could be extended

if the situation demanded.

Amid the crisis, the United Arab Emirates said it was

quitting OPEC and OPEC+ on Tuesday. Dubai stocks were

up 0.2% on Wednesday.

"This does not change anything about the near-term

supply-demand balance. Only after the Strait of Hormuz reopens

can we discuss the UAE ramping up oil production," said Bas van

Geffen, senior macro strategist at Rabobank.

"If other countries follow... it erodes the OPEC's cartel.

The balance of powers in the region already seems to be

shifting."

Stocks in emerging Europe were broadly higher, with Hungary

up 0.2%. Polish stocks gained 0.1% after seven

sessions of losses.

Romania's stocks were 1% higher. The minority

government of Romania's pro-European Prime Minister Ilie Bolojan

could fall in early May after the leftist Social Democrats, and

the far-right opposition submitted a no-confidence motion on

Tuesday.

The country's bonds fell on prospects of another government

collapse.

Turkish equities gained 0.5%, while South African

ones slipped 0.3%.

HIGHLIGHTS:

** Thai central bank holds key rate, forecasts slower growth

and higher inflation

** Malaysia to slash 2026 federal operating spend over Iran

war costs

** Four months in, foreign outflows from Indian shares top

last year's peak

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see