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Oil hovers near 4-1/2-month peak on risks of supply shock

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Dollar firm on haven demand despite mixed signals from Fed

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Swiss franc steady after SNB cuts rates to 0%

(Updates throughout with European trading, SNB rate decision)

By Kevin Buckland, Johann M Cherian and Amanda Cooper

TOKYO/LONDON, June 19 (Reuters) -

Global stocks fell and the dollar rose on Thursday as

investors, concerned over the United States' possible

entry into the Israel-Iran air war, sought safe haven assets

and ditched riskier ones.

President Donald Trump kept the world guessing about whether

the United States would join Israel's bombardment of Iranian

nuclear sites, telling reporters outside the White House on

Thursday, "I may do it. I may not do it."

The Wall Street Journal reported that Trump had told senior

aides he approved attack plans on Iran but was holding off on

giving the final order to see if Tehran would abandon its

nuclear programme.

In Europe, stocks fell for a third day, leaving the STOXX

600 down nearly 2.5% on the week, set for its biggest

week-on-week decline since the tariff-induced turmoil of April.

U.S. S&P 500 futures fell 0.6%, although most U.S.

markets - including Wall Street and the Treasury market - will

be closed on Thursday for a public holiday.

"Market participants remain edgy and uncertain," said Kyle

Rodda, senior financial markets analyst at Capital.com.

Speculation was rife "that the U.S. will intervene,

something that would mark a material escalation and could invite

direct retaliation against the U.S. by Iran," he said. "Such a

scenario would raise the risk of a greater regional conflict,

with implications for global energy supply and probably economic

growth."

Much of the recent nervousness in markets has been centred

around crude supply shocks from the Middle East, which has

driven the price of crude oil up by 11% in a week. Brent crude

rose nearly 1% to $77.40 a barrel, close to its highest

since January.

Gold, which tends to struggle when the dollar gains,

pared earlier losses to trade at $3,366 an ounce.

The dollar itself rose broadly, leaving the euro

down 0.1% at $1.1466 and the Australian and New

Zealand dollars - both risk-linked currencies - down 0.7%

and 1%, respectively.

CENTRAL BANK POLICY

Overnight, the Federal Reserve delivered some mixed signals

to markets. Much to Trump's displeasure, policymakers held rates

steady as expected and retained projections for two

quarter-point rate cuts this year.

However, Fed Chair Jerome Powell struck a cautious note

about further easing ahead, saying at his press conference later

that he expects "meaningful" inflation ahead as a result of

Trump's aggressive trade tariffs.

Strategists at MUFG said the Fed "is underestimating the

weakness in the economy that was present before the tariff

shock, specifically, almost ignoring the cracks that have been

visible in the labor market for years."

"We maintain our view that the longer they wait to ease, the

more they may need to do."

Markets will now look to a string of central bank policy

decisions out of Europe for any possible catalysts.

The Swiss National Bank cut interest rates to zero, as

expected, leaving the franc to drift as markets had

priced in a roughly-20% chance of a half-point cut.

"The SNB's main concern may not be avoiding the impression

of being a currency manipulator - still it is politically wise

not to appear too trigger-happy to go negative with the policy

rate," Karsten Junius, chief economist at J Safran Sarasin,

said.

The franc, which has been a major beneficiary of

safe-haven buying this year, was last steady against both the

dollar, at 0.819 francs, and the euro at 0.9395

francs.

The

Bank of England is up next and is expected to keep UK rates

unchanged. Data on Wednesday showed inflation cooled as expected

last month, although food prices shot up and policymakers will

be considering the potential impact from higher energy prices in

light of the Israel-Iran war.

Sterling edged 0.1% lower to $1.341.

(Additional reporting by Kevin Buckland in Tokyo and Johann M

Cherian in Bengaluru

Editing by Shri Navaratnam and Bernadette Baum)