TREASURIES-Treasury yields rise with oil on dimming hopes for Iran resolution

(Updated in New York afternoon time)

* Oil prices rise as Iran conflict disrupts supply routes

* Fed expected to hold rates steady amid inflation concerns and soft labor market

* Kevin Warsh's Fed Chair nomination advances, Senate vote scheduled for Wednesday

By Karen Brettell

NEW YORK, April 28 (Reuters) - U.S. Treasury yields rose in tandem with higher oil prices on Tuesday, hitting a three-week high, as mounting doubts over a near-term resolution to the U.S.-Israeli war with Iran stoked concerns about the feed-through to prices from prolonged energy disruptions. Oil prices gained as stalled efforts to end the Iran war kept the Strait of Hormuz largely closed, constraining Middle East supplies, though the United Arab Emirates' announcement that it would leave OPEC and OPEC+ trimmed gains. U.S. President Donald Trump expressed unhappiness with the latest plans from Tehran. He claimed the country informed the U.S. it was in a "state of collapse" and figuring out its leadership situation. It is unclear how Iran may have communicated such a message to the U.S., and a spokesperson for the Iranian army earlier said the nation does not consider the war over.

"The rise in yield is following the rise in oil prices," said Will Compernolle, macro strategist at FHN Financial.

"That could really just be from the erratic sentiment ... it seems like the day-to-day market mood about U.S.-Iran changes even if the underlying fundamentals are the same."

The two-year note yield, which typically moves in step with Federal Reserve interest rate expectations, rose 3.9 basis points to 3.844%. The yield on benchmark U.S. 10-year notes increased 2.2 basis points to 4.358%.

The yield curve between two- and 10-year notes flattened by around two basis points to 51 basis points.

Markets are awaiting the conclusion of the Fed's two-day meeting on Wednesday, when the U.S. central bank is expected to keep rates on hold as policymakers weigh the prospect of higher inflation against the softness in the labor market. Bond markets earlier this year anticipated further monetary policy easing, but the Iran conflict has altered that equation.

Fed funds futures traders are pricing in only a 22% chance of a cut by year-end.

U.S. consumer confidence unexpectedly edged higher in April as share prices rallied following a ceasefire in the war and improved perceptions of the labor market.

This week's Fed meeting will be the last with Jerome Powell as chair. The Senate Banking Committee is expected on Wednesday to advance Kevin Warsh's nomination as Fed chairman to the full Senate, with a vote set for 10 a.m. EDT (1400 GMT). The Treasury saw fair demand for $44 billion in seven-year notes on Tuesday, the final sale of $183 billion in short- and intermediate-dated debt this week. The debt sold at a high yield of 4.175%, half a basis point above where it traded before the auction. Demand was 2.51 times the amount on offer, the highest ratio since December.

Monday's $69 billion two-year auction saw average demand while interest was soft in a $70 billion five-year note sale.

(Reporting by Karen Brettell; Editing by Joe Bavier and David Gaffen;')