FOREX-Dollar climbs as US strikes on Iran dent ceasefire optimism

(Updates headline, first paragraph and prices throughout, adds new analyst quote in last paragraph)

* Dollar rises against euro and Swiss franc

* Iran says U.S. has violated ceasefire after fresh U.S. attacks

* Prospect of Strait of Hormuz reopening had lifted risk appetite

* Safe-haven dollar finds favour as investors turn more cautious

By Chibuike Oguh

NEW YORK, May 26 (Reuters) - The dollar edged higher against major currencies including the euro and yen on Tuesday, after renewed U.S. strikes on Iran dented optimism for a near-term ceasefire, boosting demand for the safe-haven greenback. Iran said the U.S. had violated a ceasefire after it conducted what it called defensive strikes in southern Iran, while U.S. Secretary of State Marco Rubio said that negotiating a deal to halt the conflict could "take a few days."

Hopes for a peace deal have waxed and waned over the last several weeks, as confident assertions by U.S. President Donald Trump of an imminent agreement have not been followed by an actual deal to open the crucial Strait of Hormuz shipping channel.

Optimistic talk over the weekend earlier pushed Brent crude oil prices below $100 a barrel and eased demand for the greenback.

Demand for the dollar picked up slightly on Tuesday as investors' hopes for a swift end to the conflict ebbed, said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

"It's pretty straightforward what happened: We go home over the weekend, thinking we're close to a ceasefire and now there are new hostilities. So I think the market is waiting for developments," Chandler said.

The euro was down 0.12% against the dollar at $1.1629. The dollar strengthened 0.4% to 0.786 against the Swiss franc.

The dollar index rose 0.13% at 99.16 after falling 0.3% the previous day.

Brent crude futures rose 3.58% to settle at $98.58 a barrel after dropping 7% on Monday. U.S. consumer confidence eased in May as worries about inflation linked to the war intensified.

The British pound fell 0.45% to $1.3445.

YEN WEAKENS

The shift in sentiment weighed on the Japanese yen, pushing it closer to the 160-per-dollar level that traders see as a potential trigger for intervention by Tokyo.

The Japanese yen weakened 0.2% against the greenback to 159.31 per dollar.

The Australian dollar, often viewed as a proxy for risk, was 0.1% down at $0.7167.

The dollar strengthened 0.03% to 6.786 versus the offshore Chinese yuan.

"FX markets remain narrowly focused on a single theme - the back-and-forth in headlines, risk sentiment, and energy prices around the conflict in the Middle East," Goldman Sachs analysts led by Stuart Jenkins said in an investor note.

"As the shock approaches its three-month mark, we note that the correlation across Dollar pairs remains exceptionally high."

Treasury yields fell sharply on Tuesday as U.S. markets returned from a holiday, catching up on a drop in global bond yields built on expectations for a peace deal.

The yield on benchmark U.S. 10-year notes fell 7.6 basis points to 4.497%.

(Reporting by Chibuike Oguh in New York and Harry Robertson in London, editing by Deepa Babington and David Gaffen)