GLOBAL MARKETS-Shares fall as oil jumps on Middle East tensions before Fed

* Brent crude futures spike 4.7% to $108.32 a barrel

* U.S. futures fall, Europe's STOXX 600 reverses course

* Fed 'dot plot' may indicate whether a rate cut this year remains likely

* Busy central bank calendar ahead (Updates with latest news, adds quotes, updates prices)

By Stella Qiu and Lucy Raitano

SYDNEY/LONDON, March 18 (Reuters) - Shares fell on Wednesday, paring earlier gains as oil prices surged, with investors rattled by fresh developments in the Middle East conflict ahead of a key Federal Reserve meeting.

"Everything was relatively optimistic earlier on... I think the catalyst for the reversal is really these headlines we had earlier regarding the attacks on gas and oil fields in Iran," said Mike Brown, senior research strategist at Pepperstone.

Brent crude futures were up 4.7% to $108.32 a barrel, while U.S. West Texas Intermediate rose 1.9% to $97.98.

S&P 500 futures and Nasdaq futures both fell 0.5%. Europe's STOXX 600 was down 0.6%.

"I think the reason markets have reacted so adversely to that is because up to now... it's been very much a case of energy infrastructure has been spared," said Brown, adding that if energy infrastructure was now on the target list, it would mark a "pretty significant escalation".

Traders were also digesting U.S. producer prices, which increased more than expected in February, and could accelerate further as the U.S.-Israeli war against Iran boosts oil prices and the import pass-through persists.

The dollar ticked higher after the data and was last up 0.4% , while benchmark 10-year U.S. Treasury yields rose 3 basis points to 4.226%.

But overall focus remained on the Middle East, with Israel saying on Wednesday it had killed Iran's intelligence minister in the second strike on a top leadership figure in two days, and had authorised the military to target any senior Iranian official it can locate.

Meanwhile Iran struck oil facilities in the United Arab Emirates. A senior Iranian official said the new supreme leader had rejected de-escalation offers, signalling no quick end to a war that has triggered a global oil shock.

News of an agreement between Iraq and Kurdish authorities to resume exports via Turkey's Ceyhan port had brought crude prices down earlier in the session, though the Strait of Hormuz remained largely closed.

FOCUS TURNS TO FED AND POWELL

Investors are bracing for a crowded run of central bank decisions, with the Fed, Bank of Canada, European Central Bank, Bank of England and Swiss National Bank all meeting within 48 hours.

All eyes are on the Fed's decision later on Wednesday, with attention on updated economic forecasts - particularly policymakers' "dot plot" of rate projections - where the risk is that they may no longer forecast any rate cuts this year.

The Fed is expected to hold policy steady, but the debate now centres on whether the Iran conflict threatens slower growth, more persistent inflation, or a combination of both.

Fed Chair Jerome Powell will hold a press conference, with markets also watching for any signal on whether he plans to remain on the board once his term as chair ends in May.

"Consensus still points to the median dot plot showing one 25-basis-point cut for 2026, aligning with current market pricing," said IG analyst Tony Sycamore.

"That said, there's a decent chance the dots could shift more hawkish, perhaps even to zero cuts, if the committee views the oil shock as leading to stickier inflation."

The Bank of Canada also meets on Wednesday, with markets pricing no change in policy and its next move a hike by year-end.

The ECB meets on Thursday, with Europe's energy dependence making the latest shock more consequential than for the U.S.

"We don't think that the ECB will allude to hikes," said Neuberger's McMillan.

"Now the market has shifted to pricing a hike this year ... we don't think that they will go down that route yet, but really what needs to be seen is the duration and the extent to which oil and gas prices remain elevated, and really how that feeds into the inflation outlook for Europe," she said.

The euro held at $1.153 after rising 0.3% overnight. (Reporting by Lucy Raitano and Stella Qiu; Editing by Christopher Cushing, Mark Potter and Alex Richardson)