* Many Russian regions report fuel shortages

* Government cancels bond auction due to market volatility

* Kremlin says no grounds for concern on economy's stability

* Stocks fall to their lowest in three years

MOSCOW, June 23 (Reuters) - The Russian rouble weakened on

Tuesday and stocks fell to their lowest level in three years, as

people queued for fuel across the country following attacks by

Ukrainian drones on Russian refineries in recent months.

Analysts and traders also said sliding global oil prices

following talks between the U.S. and Iran, a lack of progress in

talks to end the Ukraine war, and the central bank's

smaller-than-expected key rate cut last week were behind the

market selloff.

Many regions across Russia, the world's third-largest crude oil

producer, have reported restrictions on fuel sales and rising

prices for oil products, creating long queues at filling

stations due to supply shortages in recent days.

The Moscow Exchange stock index fell by 5% on June 22 before

rebounding slightly and is now at its lowest level since March

2023, while the rouble weakened past the 75-mark against the

U.S. dollar for the first time since May 6.

"All this leads to genuine apathy on the market," said

economist Evgeny Kogan, calling the selloff "a capitulation".

Many blue-chip companies, including air carrier Aeroflot,

diamond miner Alrosa, and retailer X5, faced margin calls.

Traders told Reuters that Russian oil firms were still selling

and repatriating their bumper foreign exchange earnings after a

period of high oil prices and the temporary easing of U.S.

sanctions during the Iran war, which provided some respite for

Russia.

The economy has demonstrated resilience against Western

sanctions during the four-and-a-half years of war in Ukraine but

started to lose steam last year, slowing down to 1% growth from

4.9% in 2024.

MARKET VOLATILITY

The central bank said in a statement after last week's rate cut

that a decline in fuel production created a risk that inflation

could start rising again. The bank had tamed inflation by hiking

interest rates at the expense of an economic slowdown and an

investment crunch.

President Vladimir Putin said on Tuesday that Ukrainian attacks

on civilian infrastructure in Russia were an attempt to

destabilise society.

Shares of Russia's state-owned energy giant Gazprom, whose

subsidiary Gazprom Neft owns a Moscow refinery that was hit by

drones last week, fell over 5% below 100 roubles ($1.35) on

Monday for the first time since 2009.

Analysts at Sinara investment bank said that June 22 was one

of the worst days on the Russian stock market since 2022 when

the war in Ukraine started. The Russian market was once a

darling for foreign investors but is now off-limits due to

sanctions.

Prices for Russian government OFZ bonds have also been falling

due to concerns about the rising deficit caused by increased

military spending. The government cancelled a bond auction on

Tuesday citing increased market volatility.

Kremlin spokesman Dmitry Peskov, asked about the rouble's

weakness and falling oil prices, dismissed concerns and said on

Tuesday that there were no grounds for concern about the

stability of Russia's economy.

"The stability of the Russian economy, macroeconomic

stability, is absolutely ensured," he said.