* European stocks gain after Asian markets rally

* President Trump says peace deal could be signed this

weekend

* Record-breaking SpaceX IPO could help set the tone for

markets

(Updates after European markets open)

By Iain Withers and Stella Qiu

LONDON/SYDNEY, June 12 (Reuters) - Global stocks gained and

oil tumbled on Friday as fresh hopes of a peace deal between

Iran and the U.S. fanned a rally, while investors awaited the

hotly anticipated market debut of Elon Musk's SpaceX

once Wall Street opens.

European stocks gained more than 1.5% in early trading

following strong gains in Asia, although Wall Street

futures pointed to a more subdued, broadly flat opening.

Oil futures were down about 2.5% after U.S. President Donald

Trump said a peace deal could be signed as soon as this weekend,

even as Tehran said it had not made a final decision on a pact.

Trump has repeatedly said a deal with Iran to end the war

was close since mid-March. This time, the indication that

diplomacy was continuing productively was enough for the market

to latch on to, Michael Nizard, head of multi-asset at Edmond de

Rothschild Asset Management, said.

"The market remains very sensitive to the peace deal and the

numerous and various declarations from Trump," Nizard added.

"Today, I think the (potential for) peace is well under-priced."

The huge SpaceX IPO also has the potential to set the tone

for global markets, given its large allocation to everyday

investors that can make more short-term decisions, Nizard said.

"This is a very important market event... the retail market is

very important for gaining momentum."

The SpaceX IPO raised a record $75 billion, valuing the

rocket and spacecraft manufacturer at $1.77 trillion and making

Musk the world's first trillionaire.

INFLATION FEARS

The Middle East peace deal, if confirmed, would be the most

significant diplomatic breakthrough yet to end the

three-month-old war, which sent global energy prices sharply

higher. The European Central Bank had to raise interest rates

for the first time in nearly three years on Thursday to nip

war-driven inflation in the bud.

Final inflation data from several European countries

including France and Spain showed inflation accelerated in May,

while official data showed Britain's economy contracted by 0.1%

in April - its first monthly drop since August.

Oil prices slumped to two-month lows on expectations of an

impending agreement. Brent crude futures dropped 2.5% at

$88.15 per barrel.

Treasuries held onto gains as hopes of a peace deal in the

Gulf led markets to trim bets of a rate hike from the Federal

Reserve this year.

Two-year Treasury yields were steady at 4.0537%

on Friday, while benchmark 10-year Treasury yields

were at 4.814%.

The dollar was broadly flat after overnight losses. It rose

0.2% to 160.27 yen, after retreating 0.4% in the prior

session. Traders are still on high alert for intervention from

Japanese authorities as the yen stays close to the 160 level

that many see as a line in the sand.

Precious metals retreated on Friday. Spot gold

slipped 0.8% to $4,181 an ounce, following a 3.5% jump

overnight.