Apr 5 (Reuters) - After two days of gains, the IBEX 35 retreated on Friday in a climate of fear of the escalation of war in the Middle East and caution awaiting an important indicator of the U.S. economy.

The Spanish stock index is heading for its first weekly decline after four rises inspired by the prospect of lower interest rates this year, although uncertainty persists as to when the cuts will begin and how far they will go.

After some hawkish statements by Federal Reserve (Fed) members, the focus will be on the U.S. labor report for March, in search of clues about the state of the economy due to its implications for inflation.

Analysts polled by Reuters forecast on average a net increase of 200,000 jobs in April, while wages would rise by 0.3% month-on-month and the unemployment rate would remain at 3.9%.

Stronger-than-expected employment and wage data could reduce the odds of a US interest rate cut in June, which according to interest rate futures on LSEG's IRPR tool currently stand at 65.3%.

Elsewhere, looming over the financial markets were concerns about a widening of the Israeli war on Gaza, following the attack on the Iranian consulate attributed to Israel and subsequent threats from Iran.

These tensions, plus OPEC+'s decision to maintain production cuts, in a context of economic strength, pushed up the price of crude oil, with the barrel rising to 91.05 dollars a barrel on Friday.

In equities, at 07:05 GMT, Spain's IBEX 35 was down 109.20 points, or 0.98%, to 10,978.00 points, while the FTSE Eurofirst 300 index of large European stocks was down 1.07%.

The biggest fall was recorded by Grifols, after correcting its debt ratios upwards in response to the requirements of the stock exchange supervisor.

In the banking sector, Santander lost 1.36%, BBVA fell 1.34%, Caixabank dropped 0.92%, Sabadell fell 0.68%, Bankinter lost 0.26%, and Unicaja Banco lost 0.94%.

Among the large non-financial stocks, Telefónica fell 0.81%, Inditex dropped 1.37%, Iberdrola dropped 0.57%, Cellnex fell 0.49% and the oil company Repsol rose 0.65%.

(Information by Tomás Cobos; edited by Javi West Larrañaga)