By Utkarsh Hathi and Purvi Agarwal

July 13 (Reuters) - Most Latin American assets declined on Wednesday as escalating U.S.-Iran tensions sent oil prices higher and tempered risk appetite, while currencies were mixed against the dollar.

The U.S. and Iran exchanged missile and drone attacks on Monday, casting doubts on the viability of an interim deal to end the war. Oil prices climbed 5% after U.S. President Donald Trump said Washington was reinstating a blockade of Iran.

"The bigger issue is how sustained energy pressure will constrain central banks' ability to react. We do not see a repeat of the March/April shock, but the move is still enough to challenge the benign rates backdrop," said Geoff Yu, a strategist at BNY.

"If oil pressure persists, the market will have to price in a less comfortable mix of sticky inflation, weaker consumption and reduced policy flexibility."

In Latin America, most equities were moved to a risk-off position, with Chilean stocks .SPIPSA down 0.9%, the most among peers. Its peso CLP= slipped 0.5% against the dollar.

Stocks in Brazil .BVSP, Latin America's largest economy, were off 0.6%, but losses were contained by a 2.7% rise in oil giant Petrobras PETR4.SA.

The region's largest economy is expected to grow moderately after October's presidential election, suggested a Reuters poll, with analysts saying efforts to narrow budget deficits next year may again hinge on tax hikes rather than expenditure cuts.

Mexican equities .MXX were little changed.

The broader MSCI Latin American stocks index .MILA00000PUS declined 0.4%, while the currencies equivalent .MILA00000CUS edged 0.1% lower.

Markets are awaiting inflation readings from the U.S., due on Tuesday, that would shape the Federal Reserve's policymakers' decision on interest rates later this month, with the new chair slated to appear before Congress this week.

With geopolitical tensions at the forefront again, focus will be on inflation in major economies. Recent inflation readings in Latin America have painted a mixed picture, with price pressures running hot in Colombia, Chile and Peru strengthening bets that central banks will maintain a hawkish stance.

Brazil and Mexico, on the other hand, have seen falling inflation, with many expecting a 25-basis-point cut in Brazil at the central bank's next meeting.

On the FX front, most currencies weakened against the dollar, with Brazil's real BRL= off 0.3%, and currencies in Peru and Mexico subdued.

In Chile, the fast-tracking of its pro-growth mega bill, along with other reforms, should support investment and lift its gross domestic product (GDP) to 3% next year, said BofA analysts in a note.

Key Latin American stock indexes and currencies:

MSCI Emerging Markets .MSCIEF	1652.52	-2.26
MSCI LatAm .MILA00000PUS	3017.93	-0.44
Brazil Bovespa .BVSP	176805.07	-0.6
Mexico IPC .MXX	66478.27	-0.03
Chile IPSA .SPIPSA	10960.32	-0.87
Argentina MerVal .MERV	3278857.05	-0.04

Currencies	Latest	Daily % change
Brazil real BRL=	5.1251	-0.32
Mexico peso MXN=	17.4928	-0.16
Chile peso CLP=	928.37	-0.49
Peru sol PEN=	3.4017	-0.33
Argentina peso (interbank) ARS=RASL	1,485.0	0.20
Argentina peso (parallel) ARSB=	1,505.0	0.33