* Oil sharply higher as US pressures allies on Iran crude
* Asian markets open hesitant amid trade uncertainty
* Eyes on China yuan, stocks after steep losses
* Dollar regains some ground, still within recent ranges
By Wayne Cole
SYDNEY, June 27 (Reuters) - Asian shares were subdued on Wednesday as weakness in Chinese stocks and the yuan weighed on sentiment, while oil held hefty gains as the United States pressured allies to stop buying Iranian crude.
MSCI's broadest index of Asia-Pacific shares outside Japan was off 0.05 percent after touching a two-year trough on Tuesday. Markets have been pressured by sharp losses in China, where blue chips were near 13-month lows.
Japan's Nikkei has been faring better and was all but flat in early trade.
U.S. crude oil futures jumped 3.6 percent on Tuesday after new broke that Washington was pushing allies to halt imports of Iranian crude.
The market rallied further after the American Petroleum Institute said U.S. crude inventories had fallen by much more than expected.
Early Wednesday, U.S. crude was up 8 cents at $70.61, while Brent climbed 24 cents to $76.55 a barrel.
The jump in oil boosted the Wall Street energy sector 1.4 percent, making it the biggest gainer on the S&P 500.
The S&P 500 still only managed to add 0.22 percent overall, while the Dow rose 0.12 percent and the Nasdaq 0.39 percent.
Confusion still reigned over U.S. trade policy.
The U.S. House of Representatives overwhelmingly passed a bill on Tuesday to tighten foreign investment rules, spurred by bipartisan concerns about Chinese bids to acquire sophisticated U.S. technology.
Yet President Donald Trump also endorsed a measured approach to restricting Chinese investments in U.S. technology companies, saying a strengthened merger security review committee could protect sensitive technologies.
"We remain of the view that a large scale "trade war" remains a low probability though the odds of it happening appear to have increased," said JPMorgan economist David Hensley.
He noted that the latest tariff threats from the White House would cover more than 30 percent of U.S. imports, equal to almost 5 percent of annual economic output (GDP).
"If all this were to happen, and U.S. trading partners were to retaliate, it would deliver a significant supply shock to the world economy, raising inflation and lowering growth."
In currency markets, the dollar regained some ground though investors remained unsure whether the tit-for-tat on tariffs would ultimately prove bullish or bearish for the currency.
Measured against a basket of currencies, the dollar was a fraction firmer at 94.705, after bouncing from 94.171 on Tuesday. The euro was back at $1.1648, having run into profit-taking at a top of $1.1720 overnight.
The dollar had also rallied to 110.12 yen, though that just left it in the middle of the recent 109.20/110.90 trading range.
The dollar was aided in part by recent gains on the Chinese yuan, which had stirred speculation Beijing was weakening its currency to bolster exports.
The dollar climbed 0.7 percent to a six-month peak of 6.5880 yuan in offshore trading overnight having risen for nine straight sessions.
All eyes were now on where China's central bank would set the opening fix. The yuan ended at 6.5560 on Tuesday.
In commodity markets, gold was seemingly no longer considered a safe haven by investors and hit its lowest in over six months.
Spot gold was last at $1,258.30 having hit its weakest since mid-December at $1,254.16.
Editing by Shri Navaratnam