Stocks rise as U.S. stays out of Middle East conflict for now
Oil tumbles as much as 3%, but still set for weekly gain
European nations to hold talks with Iran in Switzerland
By Marc Jones
LONDON, June 20 (Reuters) - Stock markets ticked higher on Friday while oil skirted close to its biggest daily drop since April after President Donald Trump pushed back a decision on U.S. military involvement in the Israel-Iran conflict.
Rising risks from the Middle East have loomed large on the world's top indexes again this week.
Europe's main bourses all rose between 0.5%-1% .EU after similar gains across Asia .MIAPJ0000PUS, although it was touch and go whether it would be enough to prevent a second straight weekly loss for MSCI's main world index. .MIWD00000PUS
Israel bombed targets in Iran, and Iran fired missiles at Israel overnight as the week-old war continued although Friday's markets moves, which also included a modest drop in the dollar, showed an element of relief.
That was largely pinned on Thursday's statement from the White House that Trump will decide in the next two weeks - rather than right away - whether the U.S. will get involved in the war.
European foreign ministers were to meet their Iranian counterpart in Geneva on Friday, seeking a path back to diplomacy over its contested nuclear programme.
The relief the U.S. wasn't charging into the conflict sent oil prices LCOc1 down as low as $76.10 per barrel, although they were last at just over $77 and still up 4% for the week and 20% for the month.
"Brent crude is down 2.5% today in the clearest sign that fears over an imminent escalation in the Israel/Iran conflict have eased," MUFG strategist Derek Halpenny said.
Gold, another traditional safe-haven play for traders, was also lower on the day although Nasdaq NQc1, S&P 500 ESc1, and Dow futures YMc1 were all in the red after U.S. markets had been closed on Thursday. .N
Asian shares .MIAPJ0000PUS had gained 0.5% overnight thanks to a 1.2% jump in Hong Kong's Hang Seng and as newly elected President Lee Jae Myung's stimulus plans saw South Korea's Kospi .KS11 top 3,000 points for the first time since early 2022.
China's central bank held its benchmark lending rates steady as widely expected in Beijing, while data from Japan showed core inflation there hit a two-year high in May, keeping pressure on the Bank of Japan to resume interest rate hikes.
That in turn lifted the yen JPY=EBS and pushed down the export-heavy Nikkei .N225 in Tokyo. .T
OIL RETREATS
The dollar was ending an otherwise positive week lower on the day, with the euro EUR=EBS up 0.3% against the U.S. currency at $1.1527 and the pound 0.2% higher at $1.3494. /FRX
The U.S. bond market, which was also closed on Thursday, resumed trading with the key 10-year Treasury bond yield US10YT=RR flat at 4.39%, while German 10-year yields DE10YT=RR, which serve as Europe's borrowing benchmark rate, fell 2.5 basis points to 2.49%.
Gold prices =XAU eased 0.5% to $3,354 an ounce, but were set for a weekly loss of 2.3%.
But the main commodity market focus remained oil. Brent crude futures LCOc1 were last down $1.60, or around 2.2%, at $77.28 a barrel in London although they were still on track to end the week 4% higher.
PVM analyst John Evans said the big market risk of the Middle East troubles was "unintended action that escalates the conflict and touches upon oil infrastructure".
"The world has more than adequate supply for 2025, but not if the nightmare scenario of 20 million (barrels per day) being blocked in the seas of Arabia, however briefly that might be," he said.
Israeli and energy stocks have outperformed since June 12 https://reut.rs/448FSlg
(Additional reporting by Stella Qiu in SydneyEditing by Frances Kerry)
((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters Messaging: marc.jones.thomsonreuters.com@reuters.net X/Twitter @marcjonesrtrs))
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