US STOCKS-Wall St falls as Middle East turmoil clouds Fed outlook

* Indexes off: Dow 0.46%, S&P 500 0.71%, Nasdaq 0.99%

* Trump mulls Kharg Island takeover, additional troop deployment

* Main indexes on track for fourth straight weekly loss

* FedEx (FDX) up on strong forecast; Energy stocks gain (Updates prices throughout, adds analyst comment)

By Johann M Cherian and Utkarsh Hathi

March 20 (Reuters) - Wall Street's main indexes fell on Friday to multi-month lows as the Iran war entered its fourth week, roiling energy markets and forcing investors to aggressively rethink the Federal Reserve's next policy move.

The conflict in the Middle East showed no signs of easing, with one report saying the Trump administration is planning to occupy or blockade Iran's Kharg Island, and another that the U.S. is deploying thousands of additional troops to the region.

A flurry of central bank decisions this week along with the Fed acknowledged how the conflict has complicated policymaking. Fed Governor Christopher Waller said on Friday he was planning to dissent in favor of a rate cut at the central bank's meeting due to unexpected job losses until a developing oil shock raised inflation risks.

While U.S. policymakers still pencil in at least one quarter-point interest rate cut this year, markets are less convinced.

Sovereign bonds also sold off globally, with the yield on the 30-year Treasury note up 8 basis points to touch its highest since September.

Traders have pushed back expectations for an interest rate cut to late 2027, according to the CME's FedWatch tool, with odds for a rate hike by year-end now standing at roughly 40%.

"It's far too soon to make that suggestion," said Phil Blancato, chief executive officer of Ladenburg Thalmann Asset Management.

"When you look at PCE prices, they're basically stable. But let's remember we care more about core than headline and if there's any kind of conclusion that an end to the war is going to bring oil prices back down, (expectations for a rate-hike are) certainly more rhetoric than reality."

At 12:15 p.m. ET, the Dow Jones Industrial Average fell 210.29 points, or 0.46%, to 45,811.14, the S&P 500 lost 46.79 points, or 0.71%, to 6,559.70 and the Nasdaq Composite lost 218.59 points, or 0.99%, to 21,872.10.

Wall Street's fear gauge, the CBOE volatility index, spiked 1.17 points to 25.31.

Ten of the 11 S&P 500 sector indexes were in the red, led by bond proxies real estate and utilities, which fell over 2% each.

Friday also marks the once-in-a-quarter simultaneous expiry of derivatives contracts tied to stocks, index options and futures, also known as "triple witching," which can boost trading volume and aggravate volatility.

All three main indexes were heading for their fourth straight week of losses and were below their 200-day moving average, a technical indicator reflecting long-term momentum.

The small-cap-focused Russell 2000 index slipped 1.2% and had briefly touched a 10% drop from all-time highs earlier this week.

Super Micro Computer (SMCI) tumbled 28% after three people associated with the artificial intelligence server maker were charged with smuggling at least $2.5 billion of AI technology to China. Rival Dell advanced 6%.

FedEx (FDX), often seen as a barometer of business activity, issued upbeat forecastsand said global demand was holding steady despite geopolitical tensions, sending its shares up 1.9%. Rival United Parcel Service (UPS) added 0.6%.

Gains have been strong in energy stocks, with the S&P 500 sector index up 1.5%, putting it on track for its 13th straight weekly winning streak. The rally would be its longest on record, as geopolitical events in Venezuela and the Middle East dominated much of the first quarter.

Declining issues outnumbered advancers by a 4.15-to-1 ratio on the NYSE and by a 2.47-to-1 ratio on the Nasdaq.

The S&P 500 posted 11 new 52-week highs and 25 new lows, while the Nasdaq Composite recorded 28 new highs and 175 new lows.

(Reporting by Johann M Cherian, Utkarsh Tushar Hathi in Bengaluru; Editing by Saumyadeb Chakrabarty and Maju Samuel)