(Updates to midafternoon trading, adds analyst comments)

* Indexes up: Dow 2.82%, S&P 500 2.58%, Nasdaq 3.05%

* European stocks notch biggest percentage jump in a year

* Fed minutes reveal openness to rate hikes due to rising

inflation expectations

* Oil stocks tumble as crude prices slump to below $100 a

barrel

* Airlines, cruise operators rebound

By Stephen Culp and Purvi Agarwal

NEW YORK, April 8 (Reuters) - U.S. stocks surged on

Wednesday after a last-minute, two-week ceasefire agreement

between the United States and Iran lifted investor sentiment.

All three major U.S. stock indexes burst out of the starting

gate with sharp gains under the power of a broad relief rally

after a deal brokered by Pakistan resulted in a two-week

suspension of the war. The conflict, which began with joint

U.S.-Israeli strikes on Iran on February 28, has sent world

markets reeling, disrupted global oil supply and sparked fears

of rising inflation.

A senior Iranian official told Reuters that the crucial

Strait of Hormuz, through which one-fifth of the world's oil is

shipped, could be reopened on Thursday or Friday ahead of peace

talks if the countries agreed upon a framework for the

ceasefire.

"It's kind of a one-note day," said Ross Mayfield,

investment strategy analyst at Baird in Louisville, Kentucky.

"This big, risk-on rally is exactly what you would expect, when

over the last six weeks, sentiment got washed out."

"So when you have a catalyst there's more room to the

upside," Mayfield added. "The market has been setting itself up

for something like this for weeks now."

The S&P 500 shot above its 200-day moving average for the

first time since mid-March, while the Dow was gearing up for its

largest single-session gain since last May.

Economically sensitive Dow Transports touched an

all-time high, while the Russell 2000 outperformed its

larger-cap peers.

The rally was not confined to U.S. indexes. European shares

rose 3.9%, their biggest one-day percentage gain in a

year. MSCI's World index was up 3.3%.

"Most other countries were more exposed to an energy shock

and a food shock than the U.S.," Mayfield said. "So this is a

much bigger near-term relief for international stocks."

The CBOE Market Volatility index, a barometer of

investor anxiety, dipped to its lowest level since the beginning

of the war.

Front-month WTI and Brent crude futures slid

13.0% and 17.0%, respectively, dropping below $100 per barrel.

Minutes from the U.S. Federal Reserve's March meeting,

released on Wednesday, showed a growing openness to rate hikes

as policymakers raised their 2026 inflation outlook due to

war-related oil shock.

The Dow Jones Industrial Average rose 1,311.67

points, or 2.82%, to 47,896.13, the S&P 500 gained 170.52

points, or 2.58%, to 6,787.48 and the Nasdaq Composite

gained 670.59 points, or 3.05%, to 22,688.24.

Of the 11 major sectors in the S&P 500, nine were enjoying

gains of 1% or more, with industrials leading the

pack. Energy stocks, dragged down by falling crude prices, were

the sole percentage losers, falling 4.8%.

Sectors that have suffered a beating since the war began

enjoyed a robust bounce-back. Commercial airlines

jumped 7.6%, travel and leisure-related stocks shot

up 6.2% and homebuilders rose 5.6%.

Delta Air Lines ( DAL ) gained 6.0%, despite its disappointing

second-quarter profit forecast. The commercial air carrier

declined to update its annual outlook due to uncertainties

related to the Iran war.

Delta peers Southwest Airlines ( LUV ) and United Airlines

advanced 7.3% and 10.1%, respectively.

Cruise operators Carnival added 11.6% and Norwegian

Cruise Line ( NCLH ) rose by 9.4%.

Levi Strauss jumped 12.1% after the apparel maker

raised its annual sales and profit forecasts.

Advancing issues outnumbered decliners by a 5.73-to-1 ratio

on the NYSE. There were 164 new highs and 30 new lows on the

NYSE.

On the Nasdaq, 3,717 stocks rose and 985 fell as advancing

issues outnumbered decliners by a 3.79-to-1 ratio.

The S&P 500 posted 19 new 52-week highs and no new lows

while the Nasdaq Composite recorded 126 new highs and 39 new

lows.