* Equities catch breath on Friday after recouping March

losses

* Dollar near six-week lows as demand for safe havens

fades

* US, Iran may meet at weekend; Strait of Hormuz remains

closed

(Updates with early European moves)

By Ankur Banerjee and Alun John

SINGAPORE/LONDON, April 17 (Reuters) - World stocks held

near record highs on Friday and were set for their third

straight week of gains, while benchmark oil prices were pinned

below $100 a barrel ahead of a crucial weekend that could pave

the way for a near-term resolution of the Iran war.

U.S. President Donald Trump expressed confidence that an

agreement could soon be reached to end the conflict and urged

the Tehran-aligned Hezbollah group to hold its fire as a 10-day

truce went into effect between Lebanon and Israel.

Trump said the next meeting between U.S. and Iranian

negotiators could take place at the weekend.

Investors have been quick to take an optimistic view of any

signs of denouement this month, even though the Strait of Hormuz

- through which a fifth of the world's oil and gas supplies

typically flow - remains largely closed.

That optimism has kept oil prices below $100 per barrel

though they remain well above the pre-war levels. Brent crude

futures were down around 1% on Friday to $98.5 a barrel.

U.S. West Texas Intermediate crude futures fell 1.2% to

$89.1 a barrel.

In stocks, MSCI's world share index, which tumbled in March

due to the war, hit a record high on Thursday and has risen 8.5%

so far in April.

"The debate is 'has this gone too far too fast?', and 'what

in the world are equities thinking rallying so hard when oil is

still at $100?,'" said Ben Laidler, head of macro and equity

strategy at Bradesco BBI.

"But that misses the point," Laidler said, "(Investors) are

forward-looking. Relative valuations look pretty good, earnings

remain very strong, and it's a rare geopolitical event that

hasn't been a buying opportunity."

He said to continue rallying from here, stocks would need

some validation of their recent moves from continuing

de-escalatory steps in Iran bringing oil prices lower and from

first-quarter earnings.

"Expectations are quite high and we need to deliver on

them," he said.

The initial stages of U.S. earnings season have been broadly

positive, though on Friday the focus was on Netflix ( NFLX ),

which slumped 9.6% in premarket trading after forecasting

below-expectation second-quarter earnings per share.

Broader index moves were more muted, with traders reluctant

to make big bets ahead of a critical weekend when markets will

be closed.

Europe's broad STOXX 600, which has underperformed

U.S. and Asian peers, was a whisker higher as were U.S. S&P 500

futures.

Asia stocks dipped earlier in the day, but still posted

weekly gains.

BONDS LAG

Government bond markets have regained some of their lost

ground, but much less than stock markets have. Investors see

less chance of a Federal Reserve rate cut this year than they

had pre-war and still see the rate hikes from the European

Central Bank they rushed to price in in early March.

The U.S. benchmark 10-year Treasury yield was

little changed on Friday at 4.31%, down from late March highs

close to 4.5% but well above pre-war levels around 4%.

The euro zone benchmark German 10-year Bund yield was 3.03%,

like its U.S. peer, off its recent high but around 40 basis

points higher than late February.

For Andrew Chorlton, CIO for public fixed income at M&G, the

last two weeks have been surprising in how quickly markets have

been willing to look through the conflict and energy shock.

"There's quite a strong contrast between what policymakers

and central bankers are saying about the risks that this

(conflict) is creating versus what the market is implying," he

said.

"That seems somewhat complacent," Chorlton added. "It seems

unlikely that there shouldn't be some additional risk premium

priced in, either to growth or to inflation."

The U.S. dollar benefited from safe-haven flows in March,

but has since given up those gains. The euro last bought

$1.1782, just below the seven-week high it touched in the

previous session.

The yen was slightly weaker at 159.1 per dollar as

investors took stock of comments from Bank of Japan Governor

Kazuo Ueda, who steered clear of signalling a rate hike was on

the cards this month.

The remarks will keep traders guessing on the timing of the

next rate hike, with the lack of a clear signal leading markets

to reduce bets of a rate increase at the BOJ's April 27-28

policy meeting.

Gold was steady at $4,789 an ounce.