By Colin Barr

NEW YORK, June 18 (Reuters) - U.S. Treasury yields were lower on Thursday, a day after investors adopted a hawkish view of Federal Reserve Chair Kevin Warsh's first meeting and sent short-term yields to their highest level in 16 months.

The two-year yield US2YT=RR, the most sensitive to Fed rate-change expectations, was down 1 basis point on Thursday at 4.153%, after rising as high as 4.207% a day earlier. Investors were pricing in a 69% chance of a rate hike by September’s meeting, LSEG data show.

The 10-year yield US10YT=RR, more tied to global macroeconomic conditions, was down 3 basis points at 4.429% after oil prices retreated on the latest signs that the war in Iran is likely coming to an end, and that more crude is exiting the Strait of Hormuz after months of very limited flows.

Brent crude LCOc1, the global benchmark, was down 2.1% at $77.83 a barrel.

Falling energy prices on Thursday "eased forward inflationary concerns and led to meaningful declines in longer-dated Treasury yields", said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

“While we’re less convinced than the 29 bp of hikes currently priced in through the October 28 FOMC meeting, we are on board with the notion that there should be symmetry in the policy outlook from the present level.”

Warsh, who took over as Fed chief last month, made an immediate imprint in organizing a unanimous consensus around a stripped-down policy statement that jettisoned any forward guidance on what actions the central bank might take in the near term.

However new quarterly projections, eschewed by Warsh himself, showed nine of 19 policymakers now anticipate a rate hike by the end of 2026.

Later on Thursday, investors will watch closely as the government auctions 5-year TIPS. Lyngen said the rise in real, inflation-adjusted market yields over the past month should help support demand for the securities after an up-and-down response from investors recently.

U.S. data out Thursday continued to show strength, with initial claims for state unemployment benefits dropping 4,000 to a seasonally adjusted 226,000 for the week ended June 13, the Labor Department said on Thursday.

Economists polled by Reuters had forecast 225,000 claims for the latest week.

Across the Atlantic, the Bank of England kept interest rates on hold at 3.75% in June, as it has since the start of the U.S.-Iran war, judging it would be premature to raise rates now given uncertainty about the strength of increased inflation pressures.

Meanwhile the European Central Bank's chief economist Philip Lane said on Thursday the euro zone's economy may now be able to withstand slightly higher interest rates without losing steam.

Lane said the upper end of the neutral range for the ECB's benchmark rate, which neither stimulates nor curbs growth, has risen from 2.25% to 2.50%, based on bond market prices.

The ECB raised its benchmark deposit rate to 2.25% from 2% last week and left the door open to more tightening to prevent a surge in fuel costs caused by the Iran war from spreading to other prices.