* US crude up 1.7% to $70.41 a barrel

* Yen hits 40-year low; gold heads for steepest quarterly

drop since 2013

* Tech shares rebound on Wall Street after last week's

selloff

(Changes dateline and byline, updates after US market open;)

By Harry Robertson and Rodrigo Campos

LONDON/NEW YORK, June 29 (Reuters) - A global gauge of stock

markets rose on Monday as investors tracked the implementation

of an interim peace deal between Iran and the U.S., even as oil

prices rose after tit-for-tat attacks underscored the risk of

escalation.

European equities edged lower, but Wall Street led gains

with technology shares rebounding after last week's selloff

driven by concerns over AI spending.

A return to diplomacy in the Middle East would follow

several days of strikes since an Iranian projectile hit a cargo

vessel in the Strait of Hormuz last week, with both sides

accusing each other of breaking an interim ceasefire.

Oil prices were volatile, with both Brent and WTI up more

than 1% on the day but still sharply lower for the month. Recent

U.S. and Iranian attackshighlighted the fragility of the interim

deal, while expectations of a recovery in energy shipments

through the Strait of Hormuz capped gains.

"The market can take some relief in the lower oil prices and

its impact on the global economy," Mohit Kumar, chief European

economist at Jefferies, said.

"Lower oil prices should lead to a diversification trade and

growth-sensitive sectors which have suffered in the last few

months should outperform."

U.S. crude rose 1.7% to $70.41 a barrel and Brent

rose to $72.88 per barrel, up 1.24% on the day.

The Dow Jones Industrial Average rose 302.53 points,

or 0.58%, to 52,175.22, the S&P 500 rose 37.66 points, or

0.51%, to 7,391.68 and the Nasdaq Composite rose 205.04

points, or 0.79%, to 25,497.22. MSCI's gauge of stocks across

the globe rose 4.41 points, or 0.38%, to

1,107.01.

"There have been several false starts in peace negotiations.

I would expect most market participants to remain in a holding

pattern through the rest of this week," said Peter Andersen,

founder of Andersen Capital Management.

The pan-European STOXX 600 index fell 0.1%, while

Europe's broad FTSEurofirst 300 index fell 2.18 points,

or 0.09%.

Emerging market stocks rose 1.00 points, or 0.06%,

to 1,707.40 while Japan's Nikkei rose 107.23 points, or

0.15%, to 69,468.11.

RATE HIKE WAGERS

Oil prices have fallen sharply in recent weeks but measures

of inflation have nonetheless jumped in the U.S. and rising

expectations of a Federal Reserve rate hike have lifted the

dollar. The dollar index, which measures the U.S.

currency against peers, was last slightly lower at 101.25, just

below the 13-month high it touched last week.

"There's still plenty of risk facing the oil market. Even

so, participants appear to be ... focusing on what a continued

recovery in oil flows would mean for the global balance," ING

analysts said in a note on Monday.

The main focus for the U.S. economy this week will be

Thursday's jobs report for June. Three consecutive months of

stronger-than-expected payrolls have reinforced the Fed's

hawkish shift, though any cooling in the labor market could

prompt a more dovish reassessment.

Investors are pricing in at least one Fed hike this year, a

sharp reversal from expectations of two rate cuts before the

Iran war.

"The labor market appears to have accelerated," said Marc

Chandler, chief market strategist at Bannockburn Global Forex.

"The concerns that the doves had pointed to about labor markets

slowing down seem to have passed."

The Japanese yen hit a 40-year low at 161.97 per dollar, its

weakest since 1986.

"The Bank of Japan's long-awaited 25bp rate hike to 1.00%

has done little to offset the still-wide interest rate

differential with the United States, especially after the

Federal Reserve maintained a hawkish stance and signaled rates

are likely to remain elevated for longer," analysts at LMAX

Group said in a report.

The rising dollar has weighed on gold, which was down

1.3% at $4,034 per ounce. The yellow metal is set for a 13%

decline in the second quarter, its biggest quarterly drop since

2013.