By Dharamraj Dhutia

MUMBAI, July 9 (Reuters) - Indian government bonds may continue to see cautious trade, leaning towards further declines on Thursday, as oil prices and Treasury yields remain elevated and Fed minutes raised the possibilities of a September rate hike.

The benchmark 6.94% 2036 bond yield IN069436G=CC is expected to trade between 6.73% and 6.79%, a trader at a private bank said, after ending the previous session at 6.7636%. Bond yields move inversely to prices.

The 10-year bond yield rose 7 basis points on Wednesday, the most for a single session in over three months.

"Global factors have again taken over the market moves, and we are unlikely to see any major enthusiasm over the next two sessions," a trader with a private sector bank said.

Oil prices surged on Wednesday, and extended gains in Asian hours after U.S. President Donald Trump said the ceasefire with Iran was "over".

Benchmark Brent crude was hovering around $80 per barrel, as the U.S. launched fresh strikes against Iran, denting hopes for an end to the war and full reopening of the Strait of Hormuz.

India, the world's third-largest oil importer and consumer, is vulnerable to elevated crude prices, which risk higher inflation and darken the fiscal and monetary policy outlook. O/R

U.S. yields jumped after Trump's comment, and the 10-year yield remained elevated around 4.60% handle after minutes of the Federal Reserve's latest meeting drove bets on a September rate hike.

Meanwhile, foreign buying of Indian government bonds continues to provide support with net purchases rising to 365 billion rupees ($3.82 billion) since the start of June, on rising prospects of inclusion in Bloomberg's Global Aggregate Index.

RATES

India's overnight index swap rates are likely to consolidate after a sharp spike in the previous session across the curve.

The one-year rate INR1YMIBROIS=CC ended at 5.80%, up 7 basis points. The two-year INR2YMIBROIS=CC rose 8.5 bps to 5.9575%, while the five-year rate INR5YMIBROIS=CC climbed 9 bps to 6.21%, both posting their biggest rise in around seven weeks.

($1 = 95.5500 Indian rupees)