* Brent crude extends gains above $85 as Trump threatens 20%

fee on cargo shipping

* MSCI Asia Pacific ex-Japan volatile, driven by Korean

stocks

* Hawkish comments from Fed's Waller lift odds of July rate

hike

By Gregor Stuart Hunter

SINGAPORE, July 14 (Reuters) - Stocks swung between gains

and losses and oil hit a one-month high in early Asian trading

on Tuesday after President Donald Trump said the U.S. was

reinstating its blockade of Iranian shipping in the Gulf and

would collect a 20% fee on cargo traversing the Strait of

Hormuz.

In a volatile start to the session, MSCI's broadest index of

Asia-Pacific shares outside Japan rose 0.4%, led

by a 2.2% gain for Korean shares. Japan's Nikkei 225

was up 0.2%, while S&P 500 e-mini futures nudged

0.1% lower.

Brent crude futures climbed 2.6% to $85.50 a barrel,

their highest since mid-June, as trading resumed in Asia.

Markets were also rattled by hawkish comments on Monday from

Federal Reserve Governor Christopher Waller, who said the U.S.

central bank may need to raise interest rates "in the near term"

if coming data show inflation continuing well above the 2%

target.

"While the risk had been building in the system over the

past week, markets reacted aggressively" to the latest headlines

from the Iran conflict, said Chris Weston, head of research at

Pepperstone Group Ltd in Melbourne.

"The prospect of tighter monetary policy into a potential

energy shock is rarely supportive for risk assets."

Overnight, stocks on Wall Street sold off and oil futures surged

more than 9% as conflict between the United States and Iran

re-ignited, once again throttling the flow of goods through the

Strait of Hormuz. The S&P 500 closed 0.8% lower and the

Nasdaq Composite fell 1.6%.

U.S. CPI data is due for release later on Tuesday, followed by

comments from Fed Chair Warsh, who will deliver the central

bank's semi-annual monetary policy report to Congress.

Fed funds futures are pricing in an implied 43.3%

probability of a 25-basis-point hike at the U.S. central bank's

next two-day meeting on July 28-29, compared to a 34.2% chance

on Friday, according to the CME Group's FedWatch tool.

The yield on the U.S. 10-year Treasury bond was up 2.2 basis

points at 4.6297%.

The U.S. dollar index, which measures the greenback's

strength against a basket of six currencies, held at 101.29,

trading around its highest levels of the month. Gold was

down 0.1% at $3,997.27.

In Seoul, stocks moved between negative and positive territory

on Tuesday as shares in SK Hynix ( SKHY ) veered between

gains and losses, falling as much as 4.7% in the first few

minutes of trading before rallying to trade up to 4.6% higher.

The volatility for the memory chipmaker comes after a dramatic

plunge a day earlier following its Nasdaq debut last week.

In cryptocurrencies, bitcoin was up 0.3% at

$62,318.43 while ether moved 0.7% higher to $1,777.63.

(Reporting by Gregor Stuart Hunter; Editing by Muralikumar

Anantharaman)