By Harry Robertson and Rodrigo Campos

A global gauge of stock markets rose on Monday as investors tracked the implementation of an interim peace deal between Iran and , even as oil prices rose after tit-for-tat attacks underscored the risk of escalation.

European equities ended flat but Wall Street led gains with technology shares rebounding after last week's selloff driven by concerns over AI spending.

A return to diplomacy in would follow several days of strikes since an Iranian projectile hit a cargo vessel in the Strait of Hormuz last week, with both sides accusing each other of breaking an interim ceasefire.

Both Brent and WTI oil were up on the day but still sharply lower for the month. Recent U.S. and Iranian highlighted the fragility of the interim deal, while expectations of a recovery in energy shipments through the Strait of Hormuz injected volatility into markets.

"I think that reality is starting to sink in, not every barrel is going to come out the Gulf in the next week or two, you can't really jam as many barrels through there as possible to pre-war levels. As long as the situation is risky, anyone owning a boat runs the risk of having that boat attacked as it heads through the strait," said Bob Yawger, director of energy futures ⁠at Mizuho.

U.S. crude NYMEX:CL1! rose 1.86% to $70.52 a barrel and Brent ICEEUR:BRN1! rose to $72.85 per barrel, up 1.19% on the day.

The Dow Jones Industrial Average DJ:DJI rose 362.86 points, or 0.70%, to 52,238.97, the S&P 500 CBOE:SPX rose 81.02 points, or 1.10%, to 7,435.04 and the Nasdaq Composite TVC:IXIC rose 484.31 points, or 1.91%, to 25,781.93. MSCI's gauge of stocks across the globe EURONEXT:IACWI rose 9.27 points, or 0.84%, to 1,111.87.

"The scattered conflict with Iran continues, seemingly following the established pattern of heightened tensions into the weekend before those are resolved ahead of Monday's market open," William Blair's macro analyst Richard de Chazal said.

The pan-European STOXX 600 TVC:SXXP index was flat while Europe's broad FTSEurofirst 300 index FTSE:E3X rose 1.87 points, or 0.07%.

Emerging market stocks CBOE:EFS rose 3.06 points, or 0.18%, to 1,709.46 while Japan's Nikkei TVC:NI225 rose 107.23 points, or 0.15%, to 69,468.11.

RATE HIKE WAGERS

Oil prices have fallen sharply in recent weeks but measures of inflation have nonetheless jumped in the U.S. and rising expectations of a Federal Reserve rate hike have lifted the dollar. The dollar index TVC:DXY, which measures the U.S. currency against peers, was last slightly lower at 101.25, just below the 13-month high it touched last week.

"There's still plenty of risk facing the oil market. Even so, participants appear to be ... focusing on what a continued recovery in oil flows would mean for the global balance," ING analysts said in a note on Monday.

The main focus for the U.S. economy this week will be Thursday's jobs report for June. Three consecutive months of stronger-than-expected payrolls have reinforced the Fed's hawkish shift, though any cooling in the labor market could prompt a more dovish reassessment.

Investors are pricing in at least one Fed hike this year, a sharp reversal from expectations of two rate cuts before the Iran war.

"The labor market appears to have accelerated," said Marc Chandler, chief market strategist at Bannockburn Global Forex. "The concerns that the doves had pointed to about labor markets slowing down seem to have passed."

The Japanese yen hit 161.97 per dollar, its weakest since 1986.

"The Bank of Japan’s long-awaited 25 (basis point) rate hike to 1.00% has done little to offset the still-wide interest rate differential with the United States, especially after the Federal Reserve maintained a hawkish stance and signaled rates are likely to remain elevated for longer," analysts at LMAX Group said in a report.

The rising dollar has weighed on gold, which TVC:GOLD was down 1.9% to $4,010.32 an ounce. The yellow metal is set for a 13% decline in the second quarter, its biggest quarterly drop since 2013.