NEW YORK, July 14 (Reuters) - The Standard & Poor's 500 and Nasdaq Composite indexes rose on Tuesday after strong results from major banks and a weaker-than-expected inflation report boosted risk appetite amid escalating tensions in the Middle East.

Shares of chipmakers performed better, which in turn led the Nasdaq index to rise, while the Dow Jones Industrial Average was the least performing on Wall Street.

The U.S. Labor Department’s Consumer Price Index showed inflation fell in June at a faster pace than analysts had predicted, partly due to a drop in energy prices amid signs last month of progress in negotiations to end the trade war between the United States and Iran.

Federal Reserve Chairman Kevin Warsh gave his first testimony before Congress since his appointment, outlining the central bank's plan to contain rising inflationary pressures. Warsh's testimony came as the battle for control of the Strait of Hormuz escalated into an exchange of airstrikes between the United States and Iran, driving up crude oil prices and fueling concerns about further price increases.

Chuck Carlson, CEO of Horizon Investment in Indiana, said, "The inflation report appears to refute the argument that the central bank will raise interest rates... It provides cover for the Federal Reserve, for the time being."

He added, "Warsh says we can reduce inflation, and that's what the people he was talking to wanted to hear. Perhaps inflation will come down without the need to raise interest rates."

The second quarter earnings season began with five major US banks reporting strong results, supported by robust trading and deal-making.

Goldman Sachs shares rose, buoyed by an accelerated pace of deal-making and heightened geopolitical uncertainty that boosted the bank's trading activity. Shares of both JPMorgan Chase and Bank of America also climbed after they reported better-than-expected results.

According to preliminary data, the S&P 500 rose 28.69 points, or 0.38 percent, to 7,544.03, and the Nasdaq Composite gained 236.48 points, or 0.91 percent, to 26,109.65. The Dow Jones Industrial Average climbed 28.92 points, or 0.05 percent, to 52,527.56.