UK's FTSE set for 2 pct weekly drop as commodity stocks fall

* FTSE 100 down 0.5 pct, extending retreat off record highs

* Carnival (LSE: CCL.L - news) rises after better-than-expected profits

* FTSE on track for 2 pct weekly fall

* Falls in iron ore hit mining stocks

* Pullback in oil price weighs on BP and Shell (LSE: RDSB.L - news)

By Sudip Kar-Gupta

LONDON, March 27 (Reuters) - Britain's main equity index fell for a fourth day on Friday, pulled down by commodity stocks as iron ore prices plunged and a stronger U.S. dollar also weighed on mining shares.

Energy shares such as BP and Royal Dutch Shell (Xetra: R6C1.DE - news) dipped too with lower oil prices, although cruise ship company Carnival rose more than 5 percent after posting higher-than-expected profits.

The blue-chip FTSE 100 index, which hit a record intraday high of 7,065.08 points on Tuesday, fell 0.5 percent to 6,860.61 points - on track for a weekly loss of 2.3 percent.

Iron ore futures slid on the prospect that global producers would continue to lift supply.

The head of Rio Tinto (Xetra: 855018 - news) , the world's second-largest iron ore extractor, also dismissed as "harebrained" a suggestion by smaller rival Fortescue Metals (Hamburg: FVJ.HM - news) that miners should cap output to boost prices.

Rio Tinto fell 3 percent while rival miner Anglo American (LSE: AAL.L - news) retreated 3.6 percent, the worst-performing FTSE 100 stock in percentage terms.

A rise in the dollar, which erodes the purchasing power of those buying commodities with other currencies, also hurt the sector.

Miners account for around a tenth of the FTSE, and their weakness meant the UK market underperformed gains on rival European markets.

"Sustained losses for oil and copper have meant that the FTSE's influential commodity sectors have given no relief for the UK index," said Spreadex analyst Connor Campbell.

Oil prices dropped more than $1 a barrel after a two-day rally prompted by geopolitical tensions in the Middle East.

Goldman Sachs (NYSE: GS-PB - news) said the bombing of Yemen would have little effect on oil supplies because it was only a small crude exporter and tankers could find ways to avoid its waters.

Drugmaker Shire outperformed to rise 2.3 percent after UBS (NYSEArca: FBGX - news) increased its price target on the stock, while Vodafone rose 0.5 percent after paying less money than investors had forecast in an Indian airwaves auction.

Joe Rundle, head of trading at ETX Capital, expected the FTSE's pullback to be relatively short-lived given record low UK interest rates and an economic recovery. "I do think we're going to see a leg upwards next week," he said. (Additional reporting by Francesco Canepa; Editing by Ruth Pitchford; Editing by Toby Chopra)