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Markets on edge as Trump urges Tehran evacuation

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Crude prices climb as much as 2%, gold prices edge higher

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BOJ Governor Ueda to brief media at 0630 GMT

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Fed scheduled to start two day policy meet on Tuesday

(Updates throughout with European trading)

By Johann M Cherian and Amanda Cooper

LONDON, June 17 (Reuters) - Stocks fell, while oil and

gold rose on Tuesday, as fighting between Israel and Iran

entered a fifth day, raising investor concerns over the risk of

a broader regional conflict in a week packed with key central

bank decisions.

U.S. President Donald Trump urged everyone to evacuate

Tehran and cut short his visit to the Group of Seven summit in

Canada, while a separate report said he had asked for the

National Security Council to be prepared in the situation room.

S&P 500 futures initially dropped 0.7% before paring

some of those losses, while crude prices rose as

much as 2.2% to a high of $74.85 a barrel, bringing gains in the

last week to around 11%.

Adding another layer of complexity for investors this week

is a raft of central bank meetings, starting with the BOJ and

including the Federal Reserve, Bank of England and Swiss

National Bank.

"Investors are trying to take all this on board. It is very

difficult at the moment, I think. And there's an understandable

degree of nervousness. Should I really be holding on to these

stocks now at these levels?" Chris Beauchamp, chief market

analyst at IG, said.

"Once the central bank parade is out of the way, then we

might get a better sense of where they view things."

The heightened uncertainty kept investors flocking to

traditional safe-haven assets, as a rise in U.S. Treasuries

pushed yields lower across the curve, while gold prices

edged up 0.3%.

Stocks in Europe sagged, leaving the STOXX 600 down

0.7% on the day and around its lowest in three weeks, while euro

zone government bond yields held steady.

The major concern for investors with the conflict between

Israel and Iran is the potential for it spill over into the

broader Middle East, home to a large portion of the world's oil

supply.

No disruptions to crude supply have been reported yet,

although news of a collision between two ships in the Gulf of

Oman sent another brief jolt through the oil market overnight.

BOJ OUTLOOK

The Bank of Japan, the first major central bank to decide on

monetary policy this week, left short-term interest rates

unchanged at 0.5% as expected. The central bank said it would

slow the pace at which it is unwinding its massive holdings of

government bonds to avoid disrupting the market.

Weak demand for Japanese government bonds (JGBs) at recent

auctions, along with concern about the country's finances, sent

longer-dated borrowing costs spiralling to record highs last

month.

The yen strengthened modestly, leaving the dollar

down 0.1% at 144.725, while yields on 10-year bonds

rose 2.5 bps to 1.475%, as the BOJ's outlook

suggested there would be less support for shorter-dated paper.

"The slower pace of bond tapering was what the market had

hoped for and it help prevent long-term interest rates from

shooting up," Saisuke Sakai, a senior economist at Mizuho

Research and Technologies said.

Meanwhile, the Federal Reserve is expected to hold rates

steady on Wednesday but the focus yet again will be on the path

Fed Chair Jerome Powell charts for future rate cuts as

policymakers try to navigate Trump's tariff policies and their

global impact.

Traders are pricing in two cuts by the end of the year.

Investors also monitored developments on trade deals with

Trump's early July deadline on tariffs fast approaching.

Tariff talks between Japan and the United States on the

sidelines of the G7 summit fell short of a breakthrough, while a

deal with Britain left unresolved the issue of steel and

aluminium duties.

Gold, which has gained 30% so far this year, was up

another 0.1% at $3,385 an ounce.