April 20 (Reuters) - UAE markets retreated in early trade on Monday, as fears deepened that the ceasefire between Washington and Tehran could unravel after the U.S. seized an Iranian cargo vessel, while traffic through the Strait of Hormuz remained largely suspended.

Hopes for a more lasting peace in the region dimmed further after Iranian state media reported that Tehran had rejected fresh talks and would not take part in a second round of negotiations the U.S. had hoped to convene before Tuesday's ceasefire expiry, citing the ongoing blockade, threatening rhetoric, and the United States' shifting positions and "excessive demands."

Dubai's main share index .DFMGI dropped 1.3%, hit by a 1.6% fall in blue-chip developer Emaar Properties EMAR.DU and a 2% slide in toll operator Salik Co SALIK.DU.

Brent crude futures jumped about 7% to $96.85 a barrel in early Asian trading, as investors dealt with conflicting messages about the war. O/R

Now in its eighth week, the war has triggered a historic shock to global energy supplies, sending oil prices soaring as the Strait remains effectively closed.

In Abu Dhabi, the index .FTFADGI lost 0.3%.

The United Arab Emirates has begun talks with the United States on a potential financial backstop should the U.S.-Israeli war with Iran deepen the Gulf nation's crisis, the Wall Street Journal reported on Sunday. Reuters could not immediately verify the report.