GLOBAL MARKETS-Oil extends gains; Asian steel makers drop

                                
 (Updates with latest Asian prices, expected Europe opening)
                                
 * Oil edges up on Nigeria strike, Israeli-Iran tensions
                                
 * Asian shares fall; steel makers drop on iron ore
contracts
                                
 * Fed meeting awaited; focus on statement
                                
 By Rafael Nam
                                
 HONG KONG, June 24 (Reuters) - Oil prices climbed further
on Tuesday, propped up by worries over supply disruptions in
Nigeria and tensions in the Middle East, while Asian stocks
eased to new multi-month lows on concerns about the U.S.
economy.
                                
 Surging energy costs in Asia coincide with signs of a
global economic slowdown, a bad omen for a region that relies
on exports to help fuel profits.
                                
 United Parcel Service Inc <UPS.N>, the world's largest
package delivery company, warned on Monday that high fuel
prices and a sluggish U.S. economy will hit its second-quarter
earnings would be below expectations. [ID:nN23286160]
                                
 Trading was thin, with the dollar and regional bonds steady
as investors wait for the outcome of a two-day U.S. Federal
Reserve meeting that is widely expected to end on Wednesday
with no change to interest rates.
                                
 European shares were set to open flat on Tuesday as well.
                                
 "Investors are holding back ahead of the U.S. interest rate
meeting, as they are keen on hearing the Fed's comments on the
economy and any hints about its future stance," said Bae
Sung-young, a market analyst at Hyundai Securities in Seoul.
                                
 "What the market needs is some sort of positive outlook
from the Fed, but we'll see about that."
                                
 The MSCI index of Asian stocks outside Japan
<.MIAPJ0000PUS> inched down 0.1 percent, after at one point
hitting its lowest since late March.
                                
 The index has fallen some 17 percent so far this year,
reflecting investor unease about inflation and the global
economy, as well as fears of more write-downs by financial
firms.
                                
 Asian central banks from China to Vietnam, are being forced
to tighten monetary policy, as they grapple with surging energy
and food costs, bringing an end to several years of
double-digit growth in several of the region's bourses.
                                
 Tokyo's Nikkei average <.N225> closed flat.
                                
 Shares in Taiwan <.TWII> fell 1.8 percent, while markets in
South Korea <.KS11>, Hong Kong <.HSI>, and Singapore <.FTSTI>
were down less than 1 percent each.
                                
 But shares in Australia <.AXJO> and India <.BSESN> rose,
while Shanghai's main index <.SSEC> gained 1.8 percent.
                                
 STEEL MAKERS HIT
                                
 Among the big movers in the region, shares in steel makers
slumped after Baoshan Iron and Steel (Baosteel) <600019.SS>
agreed on behalf of the Chinese steel industry to the steepest
price rise in at least a decade for iron ore term contracts
with Rio Tinto <RIO.AX> <RIO.L>. [ID:nSHA250087]
                                
 Baosteel shares dropped as much as 10 percent at one point,
while South Korea's POSCO <005490.KS> fell 1.9 percent, as
concerns it would also have to pay up offset its announcement
on Tuesday it would raise steel prices. [ID:nSEO184109]
                                
 Australia-listed shares of Rio Tinto gained 3.2 percent,
while rival BHP Billiton <BHP.AX> <BLT.L>, which has not signed
a deal, rose 2.9 percent in Sydney on expectations it will also
win better terms. [ID:nPEK161536]
                                
 BHP had previously launched a formal bid for rival Rio
Tinto.
                                
 Meanwhile, shares in Origin Energy <ORG.AX> surged 5.7
percent after British gas producer BG Group <BG.L> submitted a
hostile $13.1 bid for the Australian firm. [ID:nSYD35560]
                                
 OIL GAINS
                                
 U.S. crude futures prices <CLc1> rose for a third
consecutive session, up 15 cents at $136.89 a barrel as of 0605
GMT, after already gaining more than $1 on Monday. Oil hit a
record $139.89 on June 16.
                                
 Saudi Arabia's recent pledge to increase output has been
overshadowed by a limited strike by some oil workers at Chevron
in Nigeria, raising concerns that supply from the oil producing
nation could be disrupted, though it hasn't yet.
[ID:nL23390511]
                                
 On top of that, Iran and Israel are engaged in an
escalating exchange of sharp words this month, adding to
concerns over supply. For latest double click [ID:nL23360063]
                                
 The dollar edged up on Tuesday to 108.05 yen <JPY=>,
holding below a four-month high of 108.59 yen hit last week,
ahead of the Fed meeting. The euro was little changed at
$1.5522 <EUR=>.
                                
 The region's government bonds were also largely flat ahead
of the Fed. Japan's September 10-year futures <2JGBv1> were up
0.05 point at 134.05 by early afternoon.