* Goldman Sachs ( GS ) estimated Persian Gulf oil flows retreated

to the low-70s% of normal

* Fed minutes showed mounting inflation concerns despite

stable near-term labor market expectations

* Russian diesel export ban deepened supply worries after

Ukrainian drone strikes on tankers

(Adds latest prices)

By Scott DiSavino

July 9 (Reuters) - Oil prices slid about 2% on Thursday on

worries that rising inflation and other economic concerns could

weigh on global oil demand despite continuing supply constraints

as the the U.S.-Iran conflict has delayed full reopening of

Strait of Hormuz.

About 20% of global oil supplies passed through the strait

before the war.

Brent futures fell $1.72, or 2.2%, to settle at

$76.30 a barrel. U.S. West Texas Intermediate (WTI) crude

fell $1.44, or 2.0%, to settle at $72.08.

On Wednesday, Brent closed at its highest since June 19 and

WTI closed at its highest since June 22.

Iranian armed forces launched attacks on U.S. military

infrastructure in Gulf states on Thursday following U.S. strikes

on Iran's southern coastal and eastern provinces, further

straining a three-week-old ceasefire agreement.

The attacks came on the day that Iran buried its slain

Supreme Leader Ayatollah Ali Khamenei at the shrine of Mashhad,

the culmination of a week of mass funeral processions and

rallies. Khamenei was killed on the first day of the war on

February 28. Separately, several explosions were heard in Iran

including in Bushehr, where one of Iran's nuclear plants is

located.

"We expect the renewed tension in the Middle East between

the U.S. and Iran to be relatively short-lived because both

countries are constrained by practical economic and political

realities," Vikas Dwivedi, global energy strategist at Macquarie

Group, said in a note.

Qatar, which has often mediated between Washington and its

adversaries including Tehran, condemned attacks on commercial

shipping and called for a return to diplomacy. Foreign ministers

of Turkey and Oman also stressed the need to avoid further

military escalation in calls with their Iranian counterpart,

Abbas Araqchi.

"After two days of attacks, Iran appears to be on the phone

looking to scale back hostilities and possibly return to the

negotiating table," Bob Yawger, director of energy futures at

Mizuho, said in a note.

Iran's Revolutionary Guards Navy said the U.S. attacks and

intervention in redirecting shipping through the Strait of

Hormuz were disrupting the waterway's gradual reopening.

"Our estimated oil flows from the Persian Gulf recovered to

above 80% of pre-war flows within the first 10 days after Hormuz

reopening as trapped tankers rushed to leave the Persian Gulf,

but retreated to the low-70s% of normal following recent attacks

on tankers," analysts at U.S. bank Goldman Sachs ( GS ) said in a

report.

U.S. JOBS AND INFLATION

In the U.S., the number of Americans filing claims for

unemployment benefits fell last week, supporting economists'

views that the labor market remained in a "slow-hire, slow-fire"

mode.

Minutes of the Federal Reserve's June 16 to 17 meeting

showed policymakers' concerns about inflation mounted last month

and they "generally expected labor market conditions to remain

stable in the near term, with the unemployment rate staying

close to current levels."

New York Federal Reserve President John Williams said on

Thursday he did not expect a sustained rise in energy prices for

the rest of the year despite the resumption of hostilities in

the Middle East, and declined to say what decision he would make

on interest rates at a policy meeting later this month.

When the Fed boosts interest rates to keep inflation in

check, it can reduce economic growth and cut demand for oil.

In China, the world's second-biggest economy behind the

U.S., producer price inflation surged in June to its highest

level in four years, piling pressure on manufacturers' profit

margins as weak domestic demand limited pricing power.

UKRAINIAN DRONES HIT RUSSIAN TANKERS

In Europe, Ukrainian drones hit a dozen more Russian tankers

in the Sea of Azov overnight, Ukraine's military said, the

latest in a campaign aimed at disrupting fuel supplies to

Russian forces and isolating Moscow-occupied Crimea.

On Wednesday, U.S. diesel futures posted their

biggest daily percentage gain in four years after Russia

announced a ban on exports of the industrial fuel, supercharging

supply concerns in a market grappling with uncertainty about

Middle Eastern oil flows.

Russia said the U.S. was wrong to believe deep Ukrainian

strikes into Russian territory could help end more than four

years of war, and could instead prolong it.

A settlement in the Ukraine war could result in the lifting

of some sanctions on Russia, which could allow Moscow to export

more oil. Russia was the world's third-biggest crude oil

producer behind the U.S. and Saudi Arabia in 2025, according to

U.S. energy data.