(Updates with new dollar low, midday price levels)

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Rising Middle East tension dents sentiment, lifts oil and

gold

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Markets give lukewarm reception to U.S.-China truce

agreement

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Trump's latest tariff salvo unnerves investors

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Soft U.S. CPI sets stage for Fed meeting next week

By Amanda Cooper

LONDON, June 12 (Reuters) - The dollar hit a new 2025

low on Thursday, while stocks eased from record highs, as a

cocktail of rising Middle East tensions and concern over the

fragility of a trade truce between Washington and Beijing drew

investors into safe-haven assets.

Separately, a report on U.S. consumer inflation on Wednesday

showed overall price pressures remained contained in May,

largely due to declines in the cost of gasoline, cars and

housing. But most economists expect inflation to pick up as the

impact of U.S. tariffs begins to bite.

The dollar, which has lost around 10% in value against a basket

of currencies this year, fell to its lowest since April 2022 in

European trading.

Global stocks took a breather from the almost-unbroken rally

that has run since early April, leaving the MSCI All-Country

World index flat, just below Wednesday's

all-time high.

In Europe, the STOXX 600 fell 0.8%, led mostly by

airlines, given brewing tensions in the Middle East and a

deadly crash

of an Air India flight bound for London that killed at

least 30 people near the Indian city of Ahmedabad.

Futures on the S&P 500 and Nasdaq fell

0.5-0.6%.

The U.S. administration on Wednesday said U.S. personnel were

being moved out of the Middle East due to heightened security

risks in the region, which briefly drove oil prices up by 4%

before they receded.

"(A flare-up in tensions) is a significant tail risk, but I

don't think it is anybody's baseline forecasts. So it's

something to watch if there is a real escalation there, then

markets will take fright and that would have ramifications for

the oil price," Daiwa Capital economist Chris Scicluna said.

Iran, for its part, said it will not abandon its right to

uranium enrichment, a senior Iranian official told Reuters on

Thursday, adding that a "friendly" regional country had alerted

Tehran over a potential military strike by Israel.

Classic safe-haven assets got a lift. The Swiss franc

and the Japanese yen strengthened, pushing

the dollar down by 1% against the franc and down 0.7% against

the yen, while gold rose nearly 1% to $3,385 an ounce.

The sense of relief stemming from a positive conclusion to

U.S.-China trade talks earlier this week, which President Donald

Trump said was a "great deal with China", evaporated by

Thursday.

RED, WHITE AND BLUE LETTERS

Adding yet another dose of uncertainty in the markets, Trump

said the U.S. would send out letters in one to two weeks

outlining the terms of trade deals to dozens of other countries,

which they could embrace or reject.

"Markets may have no choice but to respond to Trump's tariff

threat - even if it's just posturing to bring others to the

table. The gap between 'risk-on' positioning and real-world

risks has stretched too far," said Charu Chanana, chief

investment strategist at Saxobank.

Trump's erratic tariff policies have roiled global markets

this year, prompting hordes of investors to exit U.S. assets,

especially the dollar, as they worried about rising prices and

slowing economic growth.

The euro rose by as much as 1.07% to $1.16, its

highest since October 2021.

U.S. Treasuries also rallied in price, pushing

yields down 3.5 basis points to below 4.38%, while two-year

yields, which are more sensitive to inflation and

interest-rate expectations, eased 2.7 bps to 3.92%.

Later in the day, the focus will be on a producer inflation

report as some of the components feed into the Fed's preferred

inflation gauge - the Personal Consumption Expenditure Index.

Wednesday's consumer inflation index kept alive the prospect

of the Federal Reserve cutting rates by a quarter point, but

only in September, as policymakers assess how tariffs work their

way through the real economy.

"I suspect it's probably going to be a combination of the

two. Therefore it makes sense for the Fed to wait and see what

happens rather than rushing into a rate cut," AMP Capital's head

of investment strategy and chief economist Shane Oliver said.

Oil, which has fallen by 20% in the last year, eased by

1.6% to $68.63 a barrel, but was still pinned near two-month

highs, adding another moving part to the outlook for interest

rates.

(Reporting by Ankur Banerjee and Johann M Cherian; Editing by

Shri Navaratnam, Muralikumar Anantharaman, Joe Bavier and Chizu

Nomiyama )