* U.S. Secretary of State Blinken visits Middle East

* U.S. employment data shows increased hiring, wages

* Bank of America turns negative on oil stocks due to forecast

* Maersk to divert all vessels from Red Sea for foreseeable future

HOUSTON, Jan 5 (Reuters) - U.S. crude futures rose more than $2 on Friday as U.S. Secretary of State Antony Blinken prepared to visit the Middle East in an attempt to contain flaring regional tensions as the Israel-Hamas conflict rages.

Brent crude futures were up $1.17, or 1.51%, at $78.76 a barrel, while U.S. West Texas Intermediate crude futures were up $1.62, or 2.26%, to $73.82 by 10:42 CST (1642 GMT).

Both benchmarks are on track to end the first week of the year higher, rebounding from losses on Thursday triggered by hefty increases in U.S. gasoline and distillate stocks.

The price rebound serves as "a reminder of the risk that is rooted in ever-growing tension in the Middle East," PVM analyst Tamas Varga said in a note.

Expectations were tempered by a U.S. government report showing employment grew in December, which may limit interest rate easing in the new year, and a major bank's note on oil stocks.

U.S. employers hired more workers than expected in December while raising wages at a solid clip, prompting financial markets to dial back expectations that the Federal Reserve would start cutting interest rates in March.

Nonfarm payrolls increased by 216,000 jobs last month, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls rising by 170,000 jobs. The economy added 2.7 million jobs in 2023, a sharp step-down from the 4.8 million positions created in 2022.

"This report lowers the probability of the Fed cutting in March and confirms our view that the Fed will not begin cutting as soon as the markets expect," said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.

The latest Fed meeting on Thursday gave a growing sense that inflation is under control and raised concern about the risks that an "overly restrictive" monetary policy may hold for the economy.

Bank of America in a research note on Friday said it was taking a defensive stance toward oil stocks because of the long-term price forecast for oil.

Bank of America expects "the $70-$90 (a barrel) Brent trading range in place since OPEC+ intervened to hold. But the risk is a permanently backward oil curve steepened by spare capacity that is a headwind for sector value."

Benchmark prices dipped from earlier highs after Bank of America released its note.

"Our 2024 base case is $80 Brent," Bank of America added. "But recognizing perpetual backwardation as a new normal our 2-yearforward (long-term) price deck drops to $75 Brent / $70 WTI from 2026."

Maersk announced it will divert all vessels away from the Red Sea for the foreseeable future, warning customers of disruptions.

As the threat of the conflict expanding persists, Blinken was set to travel to the Middle East for a week of diplomacy, the State Department said. (Reporting by Erwin Seba; Additional reporting by Robert Harvey and Noah Browning in London, Sudarshan Varadhan in Singapore; editing by Barbara Lewis, Jason Neely, Tomasz Janowski, David Gregorio and Jonathan Oatis)