* July US CPI up 0.1% after June drop

* Mild inflation figure raises expectations of no rate hike

* Oil prices retreat after five straight gains

(Updated at 1711 GMT (1:11 p.m. ET))

By Chris Prentice and Samuel Indyk

NEW YORK/LONDON, Aug 12 (Reuters) - Global equities were

higher on Wednesday after mild inflation data reinforced bets

the Federal Reserve will hold interest rates steady, while oil

prices dipped as investors balanced lower demand against a

deadlock in U.S.-Iran talks.

The United States and Yemen's Iran-aligned Houthis reported

separate ship attacks. But oil prices fell as investors weighed

lower demand forecasts.

U.S. consumer prices increased 0.1% in July, in line with

expectations, data showed on Wednesday. The small increase could

weaken the argument for an interest rate increase from the

Federal Reserve next month. Money markets have shown a roughly

50% chance of a hike heading into the data release.

The data "relieves some of the concerns that the Fed is

being pushed toward a rate hike due to inflation, which is being

fueled by higher energy prices," said Robert Pavlik, senior

portfolio manager at Dakota Wealth Management in Fairfield,

Connecticut.

Gold prices touched their highest in more than two months as

the data dented rate hike bets. U.S. Treasuries held gains,

lifting yields.

The data did not capture the most recent rise in oil prices

, which have hurtled higher amid tensions between the

U.S. and Iran.

MSCI's gauge of stocks across the globe rose

0.33% to 1,154.42.

On Wall Street, the Dow Jones Industrial Average rose

0.05% to 53,820.52, the S&P 500 added 0.31% to 7,752.45

and the Nasdaq Composite gained 0.64% to 26,613.91.

Upbeat results from AI cloud company CoreWeave ( CRWV )

after the market closed on Tuesday gave the AI trade another

boost. Other AI infrastructure providers also rose.

In Europe, the pan-continental STOXX 600 fell

0.16%.

In Asia, MSCI's broadest index of Asia-Pacific shares

outside Japan closed higher by 0.92% at

1,636.51.

Emerging market stocks rose 0.95% to 1,681.25.

TALKS TO END IRAN WAR CONTINUE

Markets were still following talks to end the war and reopen

the Strait of Hormuz to shipping traffic.

The U.S. and Yemen's Iran-aligned Houthis reported separate

attacks on shipping on Tuesday, while both Iran and the U.S.

have stepped up their rhetoric in recent days.

Iran's most senior security official said on Tuesday the

Strait of Hormuz will remain closed unless the U.S. accepts

Iran's conditions.

Still, investors have been calm.

"Our base case for a long time has been a gradual but messy

de-escalation," said Dorian Carrell, head of multi-asset income

at Schroders.

"We don't expect traffic (through the Strait of Hormuz) to

go to its full capacity. We think that puts a floor on the oil

price and maintains an energy-driven inflationary driver in

markets in the near- to medium-term."

Oil prices fell, having climbed $1 earlier in the session,

after forecasters cut projections for 2026 global demand. Brent

crude futures dropped 0.37% to $88.58 per barrel, and

U.S. crude fell 0.26% to $82.98.

MARKETS ANTICIPATE A BOJ HIKE

The yield on benchmark U.S. 10-year notes fell

1.6 basis points to 4.668%.

Markets are increasingly pricing in an early rate hike in

Japan, putting pressure on the nation's shorter-dated bonds.

Investors priced in an almost 60% chance of a quarter-point hike

at the Bank of Japan's September meeting.

The yen weakened 0.07% to 159.39 per dollar,

remaining off last week's high of 155.20 after several suspected

rounds of intervention.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

rose 0.15% to 99.95, with the euro down 0.1% at $1.1528.

Spot gold rose 0.88% to $4,405.10 an ounce.