* JPMorgan Chase falls on NII forecast miss

* Wells Fargo Citigroup down after lower Q1 profits

* U.S. Steel dips after shareholders approve Nippon Steel merger

* Indexes down: Dow 1.17%, S&P 1.36%, Nasdaq 1.57%

NEW YORK, April 12 (Reuters) - Wall Street turned sharply lower on Friday after major U.S. banks reported mixed results, capping a week marked by market-moving inflation data, evolving expectations for U.S. Federal Reserve policy, and looming geopolitical tensions.

All three major indexes fell more than 1%, on track to notch losses on the week.

"Diminishing risk appetite is the over-arching theme heading into the weekend for a bunch of reasons," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "On top of the bank earnings, you've got a geopolitical scare going into the weekend."

Results from a trio of big banks marked the unofficial launch of first-quarter earnings season.

JPMorgan Chase & Co, the biggest U.S. bank by assets, posted a 6% profit increase but its net interest income forecast fell short of expectations. Its shares slid 5.5%.

Wells Fargo & Co's stock fell modestly after the company reported a 7% decline in profit as net interest income dropped due to weak borrowing demand.

Citigroup posted a loss after spending on employee severance and deposit insurance. Its shares slipped 2.1%.

Economic data this week, particularly Wednesday's hotter-than-expected CPI report, has suggested that inflation could be stickier than previously thought, prompting investors to reset expectations about the timing and extent of the U.S. Federal Reserve's rate cuts this year.

"As inflation data comes out it indicates that the timing of rate cuts is probably being pushed a little further out," Tuz added.

Boston Fed President Susan Collins said she expects a couple of interest-rate cuts this year, even though it could take inflation some time to return to its targeted level.

Austan Goolsbee, president of the Chicago Fed, said he remains focused on the Personal Consumption Expenditures (PCE) report due on April 26 for a clearer picture of inflation's progress toward the central bank's target.

Geopolitical tensions continue to simmer as Iran threatened to take revenge on Israel for the April 1 airstrike on its embassy in Damascus, adding momentum to the sell-off.

The CBOE Volatility Index, a measure of investor anxiety, hit its highest level since October 2023.

At 2:11 p.m. ET, the Dow Jones Industrial Average fell 449.66 points, or 1.17%, to 38,009.42. The S&P 500 lost 70.69 points, or 1.36%, at 5,128.37 and the Nasdaq Composite dropped 258.53 points, or 1.57%, to 16,183.67.

All 11 major sectors in the S&P 500 were in the red, with materials suffering the steepest percentage loss.

Advanced Micro Devices and Intel both fell more than 4% after a report that Chinese officials told the country's largest telecom firm earlier this year to phase out foreign chips by 2027.

U.S. Steel slid 2.4 after shareholders voted to approve a proposed merger with Nippon Steel Corporation .

Declining issues outnumbered advancers on the NYSE by a 3.85-to-1 ratio; on Nasdaq, a 3.18-to-1 ratio favored decliners.

The S&P 500 posted 12 new 52-week highs and nine new lows; the Nasdaq Composite recorded 34 new highs and 166 new lows.

(Reporting by Stephen Culp; Additional reporting by Shashwat Chauhan and Shristi Achar A in Bangalore; Editing by Richard Chang)