* Oil dives almost 3 percent
* Dow, S&P 500 retreat from record levels
* Dudley, Rosengren comments lift U.S. dollar (Updates with European market close)
By Chuck Mikolajczak
NEW YORK, June 20 (Reuters) - World stock markets declined on Tuesday, as a sharp drop in oil prices weighed on the energy sector, while hawkish comments from U.S. Federal Reserve officials pushed the U.S. dollar to a one-month high.
Oil prices fell nearly 3 percent to seven-month lows after supply hikes by several key producers overshadowed compliance by OPEC and non-OPEC oil producers on a deal to cut global output.
That slide weighed down energy stocks on Wall Street and in Europe. The S&P energy index dropped 1.3 percent as the worst performing of the 11 major S&P sectors and Europe's oil & gas sector slumped 2.2 percent.
"Obviously you go back to the first part of 2016 when oil made a deep dip it dragged a lot of other things with it," said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.
"We are starting to get into that area where people are thinking some of the shale exploration is going to go down. That explains weakness in energy stocks."
U.S. crude fell 2.31 percent to $43.18 per barrel and Brent was last at $45.93, down 2.09 percent.
The Dow Jones Industrial Average fell 19.22 points, or 0.09 percent, to 21,509.77, the S&P 500 lost 9.79 points, or 0.40 percent, to 2,443.67 and the Nasdaq Composite dropped 24.16 points, or 0.39 percent, to 6,214.86.
The Dow and benchmark S&P 500 had hit fresh records on Monday, buoyed by a rebound in the tech sector.
The pan-European FTSEurofirst 300 index lost 0.66 percent and MSCI's gauge of stocks across the globe shed 0.54 percent.
The U.S. dollar strengthened for a second day, hitting a one-month high of 97.871 against a basket of major currencies as Federal Reserve officials maintained a hawkish tone on hiking interest rates.
On Monday, New York Fed President William Dudley said halting the rate-hiking cycle now would imperil the economy. That was followed by Boston Fed President Eric Rosengren, who said on Tuesday the era of low interest rates in the United States and elsewhere poses financial stability risks.
In addition, Chicago Federal Reserve Bank President Charles Evans said he was increasingly concerned that a recent softness in inflation is a sign the Fed will struggle to get price pressures back to its 2 percent objective.
The dollar index, tracking the unit against other key world currencies, rose 0.26 percent, with the euro down 0.22 percent to $1.1124. The greenback is up nearly 1 percent for the month.
Sterling was last trading at $1.2621, down 0.87 percent on the day. Bank of England Governor Mark Carney doused speculation that he might soon back higher interest rates, telling bankers on Tuesday that he first wanted to see how the economy coped with Brexit talks in coming months.
Benchmark 10-year notes last rose 8/32 in price to yield 2.1617 percent, from 2.188 percent late on Monday.
Editing by Bernadette Baum