* Miners top drag on benchmark
* Markets look for next move in U.S.-Iran tensions
* U.S. Fed decision out on Wednesday
By Nikhil Subba
Sept 17 (Reuters) - Australian shares were subdued on Tuesday, as markets trod cautiously in the wake of heightened tensions in the Middle East and ahead of the U.S. Federal Reserve's policy meeting this week.
The S&P/ASX 200 index .AXJO declined 0.1% or 8.2 points to 6,665.30 by 0227 GMT. The benchmark closed 0.1% higher on Monday.
Markets await the U.S. Federal Reserve policy decision on Wednesday, where a rate cut is widely expected, but look forward to a further policy outlook considering recent developments in global issues.
During its policy meet, the U.S. Fed will have to consider heightened geopolitical tensions around the globe, such as U.S.-Iran relations following weekend attacks on Saudi Arabia which shut 5% of the world's oil supply.
"There is a lot of uncertainty associated with all the international activity, such as in the Middle East," said Doug Symes, senior client adviser at Novus Capital.
"There is a wait-and-see type of sentiment in the market at the moment ... on which way the Americans are going to react to Iran."
Iran has rejected U.S. accusations that it was behind attacks on the Saudi oil plants that risk disrupting world energy supplies and has threatened to retaliate on U.S. bases.
Australian miners .AXMM fell 1.4% on the back of lower iron ore prices and were the worst performers. The subindex was dragged lower by industry heavyweight BHP Group's BHP.AX 1.4% decline and Rio Tinto's RIO.AX near 2% fall. Gold stocks .AXGD shed 0.7% ahead of the U.S. Fed meeting.
Financials did not show much strength either, with the subindex .AXFJ slipping 0.1% lower. Among the "Big Four" lenders, Commonwealth Bank of Australia CBA.AX and Westpac Banking Corp WBC.AX were each trading about 0.1% lower.
Meanwhile, energy stocks .AXEJ continued another day of gains, buoyed by higher oil prices. Oil and Gas major Woodside Petroleum WPL.AX rose nearly 2%, while Santos Ltd STO.AX climbed nearly 1% to boost the industry index.
Nearby, New Zealand's benchmark S&P/NZX 50 index .NZ50 advanced 0.5% or 51.9 points to 10883.68, lifted by healthcare and utility stocks.
Agribusiness firm Scales Corp SCL.NZ and freight services provider Mainfreight Ltd CNU.NZ were among top performers on the New Zealand benchmark, rising over 2% each.