*

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

(Updates throughout)

By Amanda Cooper

LONDON, June 12 (Reuters) - The dollar neared a 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, skimmed its lowest levels since

late April, which in turn, marked its lowest level in three

years.

Global stocks took a breather from the almost-unbroken rally

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

World index down 0.1%, just below Wednesday's

all-time high.

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

airlines and autos, given the strength in the oil price, while

futures on the S&P 500 and Nasdaq fell 0.5%.

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 around 0.6% against both currencies, while

gold held firm at $3,350 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, one of the beneficiaries of the dollar's

decline, touched a seven-week high and was last at $1.1535.

U.S. Treasuries also rallied in price, pushing

yields down 1.5 basis points to below 4.4%, while two-year

yields, which are more sensitive to inflation and

interest-rate expectations, eased 1.6 bps to 3.93%.

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 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%

to $69.07 a barrel, but remained near two-month highs, adding

another moving part to the outlook for interest rates.