* Oil rebounds from early loss; investors worry about Syria
* Soybeans, wheat up about 3 pct on renewed crop worries
* Copper buoyed by Wall Street, hopes of Fed stimulus
By Barani Krishnan
NEW YORK, July 25 (Reuters) - Oil rose on Wednesday on fear about Syria's threat to use chemical weapons, and U.S. grains rebounded strongly from a two-day selloff on renewed worries about drought-ravaged crops.
Copper rose slightly, rebounding from an early tumble with lift from a rise in Wall Street stocks and growing appetite for risk after a report that Federal Reserve officials were moving toward more steps to aid the U.S. economy.
The Thomson Reuters-Jefferies CRB index, the commodity market bellwether, settled up 0.3 percent; at its session low it was down 0.6 percent.
The rebound was largely driven by U.S. crude oil, which accounts for nearly a quarter of the CRB's weighting. Thirteen of the 19 commodities on the index ended up.
"The geopolitical risk is out there, with worries about Syria and chemical weapons if they got into the wrong hands, and there is positive sentiment about the Fed and (potential) stimulus," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
Syria acknowledged for the first time on Monday that it had chemical and biological weapons and said it could use them if foreign countries intervened in its civil war.
"These weapons are stored and secured by Syrian military forces and under its direct supervision and will never be used unless Syria faces external aggression," Syria's Foreign Ministry spokesman Jihad Makdissi said.
Markets remained spooked by Makdissi's remarks on Wednesday despite Russia saying it had clearly told the Syrian government it was unacceptable to threaten the use of chemical weapons.
Fear over the Syrian situation helped the front-month contract for U.S. crude settle up 47 cents at $88.97 at barrel. U.S. crude rebounded from a session low of $86.84.
London's benchmark Brent crude finished up 96 cents at $104.38.
Earlier in the session, oil fell on euro zone worries and after U.S. government data showed an unexpected rise in domestic crude stockpiles last week.
Latest global economic readings added to investors concerns, with Britain's GDP contracting more than expected in the second quarter after the slump in German and French manufacturing activity reported on Tuesday.
Data showing the biggest drop in more than a year in U.S. single-family home sales in June also weighed on oil as it reflected a sluggish recovery for the housing market -- one of the pillars of the U.S. economy.
While the weaker housing market was in a way a drag on oil, it also reinforced expectations that the Federal Reserve would act to adopt more quantitative easing to support the economy.
"U.S. economic data today on home sales tell us that the optimism about the economy in the first and second quarters realistically had no foundation," said Sean McGillivray, vice president at Great Pacific Wealth Management in Grants Pass, Oregon.
GRAINS CLAW BACK FROM 2-DAY SELLOFF
U.S. soybean, wheat and corn futures rose, clawing back some of the losses from earlier in the week on renewed worries about parched crop fields in the U.S. Midwest.
Some rain was in the forecast for the next 10 days in northern and eastern parts of the Corn Belt, but large growing areas in Iowa, Illinois and Nebraska should remain dry.
"The reality of it is we are going to have to see how much rain we are going to actually get," said Sterling Smith, analyst with Citigroup said. "The drought is not over yet."
Soybeans led the way higher, rising nearly 3 percent to above $16.94 a bushel, as the market edged back toward record highs set late last week. Wheat also rose almost 3 percent, to above $9.03 and nearing a four-year high.
"Even if the weather takes a turn for the better here in the last few stages of the crop's development, we are still looking at a pretty tight stocks situation," said Nicole Thomas, analyst with McKeany-Flavell. We need to get some price rationing. Prices at 4:26 p.m. EDT (2026 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG US crude 88.97 0.47 0.5% -10.0% Brent crude 104.43 1.01 1.0% -2.7% Natural gas 3.070 -0.117 -3.7% 2.7% US gold 1609.30 31.80 2.0% 2.7% Gold 1604.00 24.16 1.5% 2.6% US Copper 337.45 2.15 0.6% -1.8%
Dollar 83.558 -0.447 -0.5% 4.2% CRB 297.240 0.870 0.3% -2.6% US corn 782.50 11.00 1.4% 21.0% US soybeans 1615.50 46.00 2.9% 34.8% US wheat 910.00 24.75 2.8% 39.4% US Coffee 176.30 0.85 0.5% -22.7% US Cocoa 2230.00 21.00 1.0% 5.7% US Sugar 23.36 0.17 0.7% 0.6% US silver 27.466 0.655 2.4% -1.6% US platinum 1396.90 12.80 0.9% -0.6% US palladium 565.25 3.65 0.6% -13.9% (Editing by Bob Burgdorfer and David Gregorio)