(Updates to US market close)

* Chip prices surge, putting Nasdaq out front

* Brent crude rises, WTI falls as US strikes on Iran

dampen peace hopes

* ECB's Isabel Schnabel signals need for rate hike in

June regardless of peace progress

* US Treasury yields fall as inflation worries ebb

By Stephen Culp

NEW YORK, May 26 (Reuters) - The S&P 500 and the Nasdaq

advanced on Tuesday, parting ways with their European

counterparts, and falling West Texas Intermediate crude prices

diverged from spiking Brent oil prices as investors weighed

optimism over an imminent U.S.-Iran peace deal against risks the

tenuous ceasefire could collapse.

Tech shares, lifted by surging chip stocks, put the

Nasdaq out front, while the S&P 500's gains were more modest.

The blue-chip Dow was in negative territory.

The S&P 500 and the Nasdaq clinched all-time closing highs.

"WTI is down, but Brent is up, gold is down, but silver is

slightly higher, the Dow is down, but the S&P and Nasdaq are

up," said Sam Stovall, chief investment strategist of CFRA

Research in New York. "It's almost like the asset classes are

diversifying by being a little long in one and short in the

other, which indicates to me that the market's not really sure

what should happen."

"If we do get a true agreement between the U.S. and Iran,

then I think the market is ready to take off," Stovall added.

The fragile truce between the United States and Iran was

imperilled after the U.S. conducted what it called defensive

strikes, which Iran called a "gross violation" of the

seven-week-old ceasefire. Even so, both sides indicated progress

toward an agreement that would stop the war and resume shipping

through the blockaded Strait of Hormuz.

U.S. CONSUMER SENTIMENT DARKENS

Economic data on Tuesday showed the mood of the American

consumer, whose spending accounts for 70% of the U.S. economy,

darkened slightly in May amid mounting inflation concerns.

The Dow Jones Industrial Average fell 117.29 points,

or 0.23%, to 50,462.41, the S&P 500 rose 45.92 points, or

0.61%, to 7,519.39 and the Nasdaq Composite rose 312.21

points, or 1.19%, to 26,656.18.

European shares dipped on fears that the U.S. missile

strikes in southern Iran could disrupt peace negotiations and

extend the Strait of Hormuz blockade, which sent Brent crude

prices higher and fueled inflation worries.

Investors were also weighing comments from European Central Bank

board member Isabel Schnabel, who said the central bank should

hike rates in June, even if a U.S.-Iran peace deal is reached.

MSCI's gauge of stocks across the globe rose

3.32 points, or 0.3%, to 1,121.47.

The pan-European STOXX 600 index fell 0.57%, while

Europe's broad FTSEurofirst 300 index fell 15.66

points, or 0.62%.

Brent crude prices spiked after settling 7% lower in the

previous session. In contrast, U.S. WTI oil slid from Friday's

close. There was no WTI settlement on Monday due to the Memorial

Day holiday.

U.S. crude fell 2.81% to settle at $93.89 per barrel,

while Brent settled at $99.58 per barrel, up 3.58%.

U.S. Treasury yields fell as hopes for a deal to reopen the

strait helped soothe inflation fears.

The yield on benchmark U.S. 10-year notes fell 8

basis points to 4.493%, from 4.572% late on Friday.

The 30-year bond yield dropped 5.4 basis points

to 5.0283% from 5.082% late on Friday.

The 2-year note yield, which typically moves in

step with interest rate expectations for the U.S. Federal

Reserve, fell 8.2 basis points to 4.045%, from 4.127% late on

Friday.

The dollar firmed amid dimming hopes for a near-term

resolution to the Middle East conflict.

The dollar index, which measures the greenback

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

rose 0.1% to 99.14, with the euro down 0.09% at $1.1632.

Against the Japanese yen, the dollar strengthened

0.25% to 159.29.

In cryptocurrencies, bitcoin fell 1.63% to

$75,946.11. Ethereum declined 1.66% to $2,072.64.

Gold prices fell as energy-driven inflation stoked rate hike

bets amid faltering hopes for a U.S.-Iran peace deal.

Spot gold fell 1.36% to $4,508.39 an ounce. U.S. gold

futures fell 0.44% to $4,501.10 an ounce.