MUMBAI, April 16 (Reuters) - Indian government bond yields may edge up in early trading on Tuesday, tracking a rise in their U.S. peers and in oil prices amid heightened tensions in the Middle East.

The yield on the benchmark 10-year is likely to trend in a 7.17%-7.22% range after closing at 7.1779% on Monday, a trader with a primary dealership said.

"The Middle East tensions are escalating as there are retaliation talks from Israel, so market sentiment will take a hit. The benchmark yield may test 7.20% in opening trade," the trader said.

Oil prices rose on Tuesday on worries over the Middle East conflict after Israel's military chief said his country would respond to Iran's weekend missile and drone attack.

Higher commodity prices could impact India's retail inflation, which eased in March. Economists already think that an interest rate cut is still some months away.

Meanwhile, the benchmark U.S. 10-year Treasury yield hit five-month highs on Monday after stronger-than-expected retail sales data suggested the Federal Reserve could delay cutting interest rates this year.

Futures markets are now pricing in 44 basis points of rate cuts by the end of December, down from over 160 bps expected at the start of the year, according to CME's FedWatch Tool.

Central banks, including the Reserve Bank of India (RBI), will be in a "wait and watch" mode, JM Financial Research said in a note.

"The RBI would prefer to act through the liquidity route and avoid any premature easing as an upside risk to inflation can arise from multiple areas, be it ongoing geopolitical issues ... (or the) El Nino condition."


** Brent crude futures 0.8% higher at $90.82 per barrel, after easing 0.4% in the previous session

** Ten-year U.S. Treasury yield at 4.6096%, two-year yield at 4.9248%

** Two states to raise 19 billion rupees via sale of bonds (Reporting by Bhakti Tambe; Editing by Savio D'Souza)