Updates with afternoon levels

By Avinash P and Ragini Mathur

June 10 (Reuters) - Latin American stocks fell on Wednesday as renewed tensions between the U.S. and Iran added to the economic uncertainty, while investors also monitored the extremely tight presidential election in Peru and other political developments across the region.

U.S. President Donald Trump said that Washington would strike Tehran again if no peace deal is reached, threatening further escalation after one of the most significant exchanges of hostilities in two months.

The latest flare-up has added another obstacle to a potential Middle East peace deal and revived concerns that a closure of the Strait of Hormuz could drive oil prices higher, worsen inflation and weigh on global growth.

U.S. consumer inflation rose in May at its fastest pace in three years. While the reading matched economists' expectations, it reinforced expectations that the Federal Reserve will keep interest rates steady. Treasury yields edged higher after the data, while the dollar was little changed.

The MSCI index of Latin American stocks .MILA00000PUS fell 0.7%, while the corresponding currencies .MILA00000CUS gauge was largely flat.

"The combination of higher yields, weaker commodities and renewed Iran headlines is hurtful for Latin American market dynamics," said Alejandro Cuadrado, Latin America strategist at BBVA.

REGIONAL POLITICS ADD TO CAUTION

In Brazil, President Luiz Inacio Lula da Silva widened his lead over Senator Flavio Bolsonaro ahead of the presidential election in October, recovering ground after reports linked the right-wing challenger to a disgraced banker, a poll showed.

Lula would win a potential second-round runoff against Flavio by 44% to 38%, according to a Quaest poll commissioned by brokerage Genial. In May, Lula led by a much narrower 42% to 41%.

"This is going to be a tight election, and we are a bit far out to make a decisive market call based purely on politics," Cuadrado said.

Brazil's benchmark Bovespa index .BVSP fell 0.8%, weighed down by a 1.1% drop in miner Vale VALE3.SA. The real BRL= was nearly flat.

In Peru, investors remained focused on an exceptionally tight presidential race, with leftist Roberto Sanchez leading conservative rival Keiko Fujimori by just over 40,000 votes.

Peru's stock benchmark .MXNUAMPESCPGPE rose 0.2%, after posting its biggest one-day gain since late 2023, while the sol PEN= weakened 0.3%.

Colombia is also heading toward a presidential vote. Leftist presidential candidate Ivan Cepeda told Reuters he will recognize the results of a runoff vote on June 21 even if they do not favor him. He is set to face right-wing lawyer Abelardo De La Espriella.

Colombian equities .COLCAP gained 0.5%, while the peso COP= appreciated 0.6% against the dollar.

In Mexico, stocks .MXX fell 0.9%, while the peso MXN= edged 0.2% lower. The Bank of Mexico said that the financial system remains resilient and has the capacity to withstand adverse scenarios, while flagging geopolitical conflicts as risks to monitor.

Chile's main stock index .SPIPSA slipped 0.2%, while the peso CLP= strengthened 0.4%. The country's finance ministry issued new GDP forecasts, projecting growth of 3% in both 2027 and 2028, rising to 3.5% by 2030.

Key Latin American stock indexes and currencies:

Stock indexes	Latest	Daily % change
MSCI Emerging Markets .MSCIEF	1667.76	-2.57
MSCI LatAm .MILA00000PUS	2865.76	-0.72
Brazil Bovespa .BVSP	168485.06	-0.78
Mexico IPC .MXX	64834.96	-0.88
Chile IPSA .SPIPSA	10479.48	-0.23
Argentina MerVal .MERV	3164310.86	0.43
Colombia COLCAP .COLCAP	2264.03	0.52
Currencies	Latest	Daily % change
Brazil real BRL=	5.1731	-0.03
Mexico peso MXN=	17.4038	0.2
Chile peso CLP=	912.61	0.39
Colombia peso COP=	3547.5	0.58
Peru sol PEN=	3.3995	-0.31
Argentina peso (interbank) ARS=RASL	1,433.0	0.69
Argentina peso (parallel) ARSB=	1,430.0	2.05