April 17 (Reuters) - State Street reported a rise in first-quarter profit on Friday, as market volatility lifted the custody bank's client activity and fee revenue.

Shares of State Street were up 1.5% in premarket trading.

The Boston, Massachusetts-based firm primarily serves institutional investors such as asset managers and pension funds in holding and servicing assets.

Global markets have been roiled by sharp swings driven by the Iran war and a broad selloff in AI-exposed software stocks, prompting investors and asset managers to rebalance portfolios.

"Looking ahead, how the macro and geopolitical environment will evolve is uncertain," CEO Ron O'Hanley said in a statement.

State Street posted a net income of $764 million, or $2.49 per share, for the three months ended March 31, compared with $644 million, or $2.04 per share, a year earlier.

Total revenue rose 16% to $3.8 billion from a year earlier, boosted by a 15% jump in total fee revenue and a 17% rise in net interest income.

Assets under custody and administration stood at $54.52 trillion as of March 31, up 17%, while assets under management were $5.62 trillion.

The results mirror those of larger peer BNY, which on Thursday reported a jump in first-quarter profit.