(Updates prices after US stock market close)

* AI optimism leads world stocks to third straight record

high

* Dollar rises on bets Fed keeps rates steady; investors

await Trump-Xi news

* Oil rises post-settlement with Strait of Hormuz traffic

in focus

* Pound, gilt trades eye bruising UK leadership battle

By Sinéad Carew and Marc Jones

NEW YORK/LONDON, May 14 (Reuters) - Strong demand for

technology stocks lifted equity indexes around the world on

Thursday, while the dollar rose after economic data and

investors awaited the outcome of a U.S.-China summit.

In bonds, benchmark 10-year Treasury yields edged down after

hitting an 11-month high as U.S. government debt found buying

interest at key technical levels.

Oil prices were trading higher after settling close to flat.

Attacks on one ship and the seizure of another stoked concerns

about the flow of energy supplies due to the Iran war, while

Iran's state media reported that about 30 vessels had crossed

the Strait of Hormuz, a key energy conduit.

While Britain's pound weakened on uncertainty about its

political leadership, the dollar climbed for a fourth straight

day after economic data kept expectations intact that the

Federal Reserve was unlikely to adjust interest rates this year.

U.S.-CHINA TALKS IN FOCUS

In Beijing, China's President Xi Jinping warned U.S. President

Donald Trump at the start of their two-day summit that

disagreement over Taiwan could send relations down a dangerous

path and even lead to conflict. Trump told Fox that China agreed

to order 200 Boeing ( BA ) jets, marking the country's first

purchase of U.S.-made commercial jets in nearly a decade.

Helping push the S&P 500 and the Nasdaq to fresh closing records

was a rally in technology shares, including chipmaker Nvidia ( NVDA )

, which added more than 4%. Earlier, Reuters reported

the U.S. has cleared about 10 Chinese firms to buy Nvidia's ( NVDA )

second-most powerful AI chip, the H200.

Broad technology sentiment was also boosted by a more than 13%

surge in Cisco ( CSCO ) shares after its earnings report and job

cut announcement, according to Garrett Melson, portfolio

strategist at Natixis Investment Managers.

"Investors are more worried about missing out on the upside

than worrying about any sort of downside," said Melson. "The

path of least resistance is that the AI trade is really on fire

right now. And there's still evidence that investors are

probably under-risked, particularly to that complex that has

just ripped to the upside."

On Wall Street, the Dow Jones Industrial Average

rose 370.26 points, or 0.75%, to 50,063.46, putting it

closer to its prior record close.

The S&P 500 rose 56.99 points, or 0.77%, to 7,501.24

and the Nasdaq Composite rose 232.88 points, or 0.88%,

to 26,635.22, marking record closes for both.

MSCI's gauge of stocks across the globe

rose 6.25 points, or 0.56%, to 1,115.56.

The pan-European STOXX 600 index closed up 0.76%.

DOLLAR RISES ON DATA

In currencies, the dollar was higher after economic data,

including retail sales for last month, in line with

expectations, continued to push out any market hopes for a

potential rate cut from the Federal Reserve.

"When we look at the fundamentals here, American consumers

are still spending. They are telling pollsters that they're more

cautious, but at the same time, they're not walking the talk,"

said Karl Schamotta, chief market strategist at Corpay in

Toronto.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

rose 0.43% to 98.89, with the euro down 0.36% at $1.1668.

Against the Japanese yen, the dollar strengthened

0.34% to 158.38.

UK POLITICAL CRISIS

Sterling weakened 0.95% to $1.3395 as investors monitored

an unfolding political crisis in Britain, while data showed that

its economy unexpectedly grew in March.

Britain's Prime Minister Keir Starmer is facing a potential

leadership challenge after heavy losses in regional elections

last week. While Health Minister Wes Streeting - seen as a

possible successor - said he was resigning and had lost

confidence in Starmer's leadership, UK Education Minister

Bridget Phillipson told reporters Starmer has the support of his

cabinet.

In U.S. Treasuries, the yield on benchmark U.S. 10-year notes

rose 0.2 basis points to 4.481%, from 4.479% late on

Wednesday, while the 30-year bond yield fell 1.4

basis points to 5.0304%.

The 2-year note yield, which typically moves in

step with interest rate expectations for the Federal Reserve,

rose 2.1 basis points to 4.011%.

U.S. crude futures extended gains to rise to $102.09

a barrel in post-settlement trading while Brent was

trading at $106.68 per barrel, up 0.99% after settling at

$105.72.

In precious metals, spot gold fell 0.78% to $4,650.82 an

ounce.