Updates prices

By Ragini Mathur and Avinash P

July 20 (Reuters) - U.S. stock index futures rose on Monday, following last week's chip-stocks-led pullback, as investors awaited a key slate of earnings that could test Wall Street's AI-driven rally, while escalating Middle East tensions kept risk appetite in check.

The second-quarter earnings season will pick up pace this week, with reports due from several major companies, including Alphabet GOOGL.O, Tesla TSLA.O, Intel INTC.O and IBM IBM.N.

A surge in AI capital spending has been a major driver behind this year's market gains, lifting semiconductor stocks and other companies that are seen as the beneficiaries of the buildout, and helping the major U.S. indexes hit record highs.

But a powerful rally in chip stocks gave way to a sharp reversal last week, raising questions about whether AI-linked gains had run too far.

The Philadelphia SE Semiconductor Index .SOX ended Friday more than 20% below its late-June record high, confirming a bear-market decline.

Investors will closely watch earnings from Intel and Texas Instruments TXN.O.

"If earnings reports in the coming weeks suggest that we remain in the spend phase of the AI buildout, investors are likely to get more impatient, and the sell-off could drag on over the summer months," said Kathleen Brooks, research director at XTB.

At 07:10 a.m. ET, Dow E-minis YMcv1 were up 133 points, or 0.25%, and S&P 500 E-minis EScv1 were up 29.25 points, or 0.39%. Nasdaq 100 E-minis NQcv1 were up 228.5 points, or 0.79%.

On Monday, memory chipmakers were higher, with Western Digital WDC.O, Seagate Technology STX.O, Micron Technology MU.O and SanDisk SNDK.O up between 3.2% and 4.2% in premarket trading.

The three main U.S. indexes fell sharply last week, pressured by a steep pullback in high-flying semiconductor shares.

The declines came even as benign inflation data eased some fears of a Federal Reserve rate increase later this month, while major U.S. banks kicked off earnings season on a positive note.

Markets are pricing in about a 12% chance of a quarter-point rate hike at the Fed's July meeting and a roughly 53% chance of another hike in September, according to CME's FedWatch tool.

Investors were closely watching the developments in the U.S.-Israeli war with Iran after a recent escalation in the nearly five-month-old conflict.

U.S. forces struck Iran for a ninth consecutive day on Monday, raising concerns over shipping through the Strait of Hormuz.

The renewed tensions have fueled worries that energy prices could climb back toward levels seen at the start of the war, reviving inflation concerns.

Earlier in the day, Brent crude LCOc1 rose above $90 a barrel for the first time since early June.

"The escalations have also eroded the assumption that the crisis in the Middle East is over and energy prices would normalize," Brooks said.

Among other premarket movers, Domino's Pizza DPZ.O gained 6.5% after the pizza chain's quarterly revenue edged past Wall Street estimates.