San Francisco Frontiers - Stock markets rally, oil prices drop on easing Middle East fears

London led the way in Europe, with its FTSE 100 up 1.5 percent to above 8,000 points around the half-way stage, closing in on a record high.

The benchmark index benefited also from a weaker pound as the Bank of England is seen cutting interest rates in the coming months as UK inflation cools.

The dollar rose across the board, while haven gold came off the boil.

In Asia, Hong Kong's Hang Seng stocks index closed with a gain of 1.8 percent.

On Wall Street, the Nasdaq tumbled Friday, partly owing to a poor response to Netflix earnings.

This week sees earnings updates from more US giants, including Google parent Alphabet, Tesla and Microsoft.

"The week starts with a relief rally in equities following a calm weekend on the geopolitical scene," noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

With Iran downplaying the recently-reported Israeli attack on the country, which came days after a drone and missile strike on Israel by Tehran, tensions between the regional foes appeared to have cooled.

While the situation remains tense, the lack of escalation over the weekend provided traders with an opportunity to pick up equities after losses last week.

Investors are setting their sights on the personal consumption expenditures (PCE) index, the Federal Reserve's preferred gauge of inflation, which is due Friday.

The reading could play a major role in the central bank's decision-making on US interest rates, and comes after successive months of above-forecast consumer price index figures.

Recent US inflation data has dented hopes for a cut in June, and traders have scaled back their outlook for how many the Fed will make this year.

Elsewhere Monday, bitcoin firmed following the long-anticipated "halving'".

Friday saw the halving of reward for operating bitcoin, a much-anticipated step designed to limit production and boost the world's biggest cryptocurrency.

- Key figures around 1200 GMT -

London - FTSE 100: UP 1.7 percent at 8,026.85 points

Paris - CAC 40: UP 0.3 percent at 8,042.07

Frankfurt - DAX: UP 0.6 percent at 17,842.00

EURO STOXX 50: UP 0.4 percent at 4,935.43

Tokyo - Nikkei 225: UP 1.0 percent at 37,438.61 (close)

Hong Kong - Hang Seng Index: UP 1.8 percent at 16,511.69 (close)

Shanghai - Composite: DOWN 0.7 percent at 3,044.60 (close)

New York - Dow: UP 0.6 percent at 37,986.40 (close)

Dollar/yen: UP at 154.76 at 154.64 yen

Euro/dollar: DOWN at $1.0636 from $1.0658

Pound/dollar: DOWN at $1.2316 from $1.2373

Euro/pound: UP at 86.35 pence from 86.11 pence

West Texas Intermediate: DOWN 0.3 percent at $82.91 per barrel

Brent North Sea Crude: DOWN 0.9 percent at $86.53 per barrel

P.Thomas--SFF