(Updates ahead of US market open)

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Stocks rise as US stays out of Middle East conflict for

now

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Oil tumbles as much as 3%, but still set for weekly gain

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European nations to hold talks with Iran in Switzerland

By Marc Jones

LONDON, June 20 (Reuters) - Stock markets ticked higher

on Friday while oil headed for 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 were all between 0.5%-1.4% higher

after similar gains across Asia, although

it was touch and go whether it would be enough to prevent a

second straight weekly loss for MSCI's main world index.

Israel bombed targets in Iran, and Iran fired missiles at

Israel overnight as the week-old war continued but Friday's

market 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 meeting 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 down as low as $76.10 per barrel,

although they are 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 and Nasdaq, S&P 500, and

Dow futures had all moved into the green as Wall Street

prepared to get going again having been closed on Thursday.

Asian shares 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 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 and pushed down the

export-heavy Nikkei in Tokyo.

OIL RETREATS

The dollar was ending an otherwise positive week on a modest

downer, with the euro up 0.3% against the U.S.

currency at $1.1527 and the pound 0.2% higher at $1.3494.

The U.S. bond market, which was also closed on Thursday,

resumed trading with the key 10-year Treasury bond yield

flat at 4.39%, while German 10-year yields

, which serve as Europe's borrowing benchmark rate,

fell 2.5 basis points to 2.49%.

Gold prices eased 0.8% to $3,345 an ounce,

leaving them set for a weekly loss of 2.5%.

But the main commodity market focus remained oil. Brent

crude futures were last down $2.45, or around 3%, at

$76.43 a barrel in London although they were still on track to

end the week almost 3% higher.

PVM analyst John Evans said oil producers' "nightmare

scenario" was that Iran or its proxies could block the Strait of

Hormuz, something which has never happened and through which 20

million barrels is shipped each day.

JPMorgan estimates that amounts to about 20% of all global

oil trade and 30% of seaborne oil trade.

"The market is currently assigning a probability below

20% to this happening," JPMorgan's Francesco Arcangeli wrote in

a note, estimating thought that a full closure of the Strait

could see oil prices surge to $120-$130 a barrel.