Adds quote in paragraph 3, updates prices

By Naveen Thukral

SINGAPORE, June 1 (Reuters) - Chicago soybean and corn futures bounced back on Monday, with higher oil prices underpinning the agricultural commodities increasingly being used to make alternative fuels amid tight energy supplies following the Iran war.

Wheat gained ground, although pressure from Northern Hemisphere harvest limited the upside in prices.

"We have higher oil today, which is directly supporting the grain and oilseed markets," said one trader in Singapore. "We will see more grains and oilseeds being diverted to make biofuels if energy supplies continue to remain tight."

The most-active soybean contract on the Chicago Board of Trade (CBOT) Sv1 rose 0.2% to $11.89 a bushel by 0206 GMT and corn Cv1 added 0.1% to $4.47-1/4 a bushel, after both closed lower in the last session. Wheat Wv1 rose 0.3% to $6.12 a bushel.

Oil prices rose more than 2% after Israel ordered troops to move further into Lebanon in the battle with the Iranian-backed Hezbollah militant group, despite a ceasefire announced more than six weeks ago.O/R

The stepped-up fighting, coming just after the U.S. hosted Israeli-Lebanon peace talks in Washington on Friday, dimmed expectations that the U.S. and Iran could soon announce an extension to their ceasefire agreement.

Soybeans and corn often track crude oil prices, as these are commonly used as feedstocks for biofuels.

Since the start of the Iran war at the end of February, countries have stepped up efforts to channel more agricultural commodities into biofuel production as they seek to offset fuel shortages and reduce dependence on increasingly expensive petroleum supplies.

Crop-friendly weather in the U.S. Midwest pushed prices lower last week as market players awaited the U.S. Department of Agriculture's weekly crop progress report on Monday.

Wheat faced pressure from the upcoming Northern Hemisphere harvests. While the U.S. crop has suffered irreparable damage from drought, many other countries are on track for good crops.

Agriculture consultancy Sovecon raised on Wednesday its forecast for Russia's 2026 wheat crop to 90.3 million metric tons from 89.7 million tons seen earlier, citing favourable "moisture reserves".

However, India forecast an El Nino-weakened monsoon in 2026 that will bring the lowest rainfall in 11 years, fuelling concerns over crops, food prices and growth in the world's fifth-largest economy battling inflationary pressures from the Iran war.