Adds latest prices

By Scott DiSavino

July 9 (Reuters) - Oil prices slid about 2% on Thursday on worries that rising inflation and other economic concerns could weigh on global oil demand despite continuing supply constraints as the the U.S. -Iran conflict has delayed full reopening of Strait of Hormuz.

About 20% of global oil supplies passed through the strait before the war.

Brent futures LCOc1 fell $1.72, or 2.2%, to settle at $76.30 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 fell $1.44, or 2.0%, to settle at $72.08.

On Wednesday, Brent closed at its highest since June 19 and WTI closed at its highest since June 22.

Iranian armed forces launched attacks on U.S. military infrastructure in Gulf states on Thursday following U.S. strikes on Iran's southern coastal and eastern provinces, further straining a three-week-old ceasefire agreement.

The attacks came on the day that Iran buried its slain Supreme Leader Ayatollah Ali Khamenei at the shrine of Mashhad, the culmination of a week of mass funeral processions and rallies. Khamenei was killed on the first day of the war on February 28. Separately, several explosions were heard in Iran including in Bushehr, where one of Iran's nuclear plants is located.

"We expect the renewed tension in the Middle East between the U.S. and Iran to be relatively short-lived because both countries are constrained by practical economic and political realities," Vikas Dwivedi, global energy strategist at Macquarie Group, said in a note.

Qatar, which has often mediated between Washington and its adversaries including Tehran, condemned attacks on commercial shipping and called for a return to diplomacy. Foreign ministers of Turkey and Oman also stressed the need to avoid further military escalation in calls with their Iranian counterpart, Abbas Araqchi.

"After two days of attacks, Iran appears to be on the phone looking to scale back hostilities and possibly return to the negotiating table," Bob Yawger, director of energy futures at Mizuho, said in a note.

Iran's Revolutionary Guards Navy said the U.S. attacks and intervention in redirecting shipping through the Strait of Hormuz were disrupting the waterway's gradual reopening.

"Our estimated oil flows from the Persian Gulf recovered to above 80% of pre-war flows within the first 10 days after Hormuz reopening as trapped tankers rushed to leave the Persian Gulf, but retreated to the low-70s% of normal following recent attacks on tankers," analysts at U.S. bank Goldman Sachs said in a report.

U.S. JOBS AND INFLATION

In the U.S., the number of Americans filing claims for unemployment benefits fell last week, supporting economists' views that the labor market remained in a "slow-hire, slow-fire" mode.

Minutes of the Federal Reserve's June 16 to 17 meeting showed policymakers' concerns about inflation mounted last month and they "generally expected labor market conditions to remain stable in the near term, with the unemployment rate staying close to current levels."

New York Federal Reserve President John Williams said on Thursday he did not expect a sustained rise in energy prices for the rest of the year despite the resumption of hostilities in the Middle East, and declined to say what decision he would make on interest rates at a policy meeting later this month.

When the Fed boosts interest rates to keep inflation in check, it can reduce economic growth and cut demand for oil.

In China, the world's second-biggest economy behind the U.S., producer price inflation surged in June to its highest level in four years, piling pressure on manufacturers' profit margins as weak domestic demand limited pricing power.

UKRAINIAN DRONES HIT RUSSIAN TANKERS

In Europe, Ukrainian drones hit a dozen more Russian tankers in the Sea of Azov overnight, Ukraine's military said, the latest in a campaign aimed at disrupting fuel supplies to Russian forces and isolating Moscow-occupied Crimea.

On Wednesday, U.S. diesel futures HOc1 posted their biggest daily percentage gain in four years after Russia announced a ban on exports of the industrial fuel, supercharging supply concerns in a market grappling with uncertainty about Middle Eastern oil flows.

Russia said the U.S. was wrong to believe deep Ukrainian strikes into Russian territory could help end more than four years of war, and could instead prolong it.

A settlement in the Ukraine war could result in the lifting of some sanctions on Russia, which could allow Moscow to export more oil. Russia was the world's third-biggest crude oil producer behind the U.S. and Saudi Arabia in 2025, according to U.S. energy data.