NEW YORK/LONDON June 18 (Reuters) - Wall Street indexes posted modest gains and oil prices dipped on Wednesday as investors weighed the impacts of a Middle East conflict and a U.S. rate decision on a global economy already grappling with uncertainty stemming from U.S. economic policy.
Brent crude oil prices initially extended their recent rise as the Israel-Iran air war entered its sixth day, feeding concerns over global oil supply, before falling 1.52% to $75.31 per barrel after U.S. President Donald Trump said Iran wanted to negotiate.
Stock buyers made cautious inroads in early trading on Wall Street, giving a 0.50% push to both the Dow Jones Industrial Average and the S&P 500 (.SPX), and a 0.56% boost to the Nasdaq Composite (.IXIC).
While geopolitics were the biggest immediate concern, other lingering doubts included a squabble over President Trump's tax bill, said Chris Maxey, Managing Director and Chief Market Strategist at New York-based Wealthspire.
"Uncertainty began at the start of the year, and it felt like it just kept growing ... It's uncertain about what's coming next with respect to the (U.S.) tax package, what's going to happen with the Federal Reserve, what's going to happen in the Middle East," he said.
"People are trying to digest all of this information without a huge amount of clarity," Maxey added.
Trump declined to answer questions on whether the U.S. was planning to strike Iran or its nuclear facilities, saying: "Nobody knows what I am going to do."
WATCH THE FED FOR CLUES
The Fed is expected to keep its main funds rate steady on Wednesday in the 4.25%-4.50% range it has held since December. It is expected to issue projections, known as a dot plot, that signal it will not move decisively for months to come.
Signs of fragility in the U.S. economy make for a challenging backdrop.
U.S. retail sales fell by a larger-than-expected 0.9% in May, data showed on Tuesday, the biggest drop in four months, while labour market indicators are showing weakness.
"Markets are going to be closely watching the Fed's quarterly dot plot for clues on how and when the central bank will resume its cutting cycle," Insight Investment co-head of global rates Harvey Bradley said.
"As tensions in the Middle East have the potential to threaten the inflation picture further, it cannot be ruled out that projections adjust to reflect just one rate cut this year,” he added.
U.S. Treasury yields fell again on Wednesday, continuing a slide on Tuesday prompted by investors calculating that geopolitical risks abroad were greater than the chances the U.S. debt pile becomes unmanageable.
The benchmark 10-year note was last yielding 2.6 basis points less, at 4.365%, from 4.391% late on Tuesday.
The two-year yield, which is more sensitive to changes in expectations for Fed interest rates, fell 1.1 basis points to 3.939%, from 3.95% late on Tuesday.
Reporting by Isla Binnie in New York and Naomi Rovnick in London, additional reporting by Rae Wee; Editing by Jacqueline Wong, Jamie Freed, Kim Coghill, Gareth Jones and Joe Bavier
