London (AFP) - Stocks rallied, the dollar jumped and oil prices steadied Thursday as traders saw an easing of tensions between the United States and Iran that weighed on haven investments such as gold and the yen.

"Stock markets are strong... as US-Iran tensions have faded," noted David Madden, analyst at CMC Markets UK.

"The strong finish in New York last night prompted buying in Asia overnight, so now the bullish sentiment has reached Europe.

"The US and Iran are still at odds with each other, but as long as a conflict doesn't seem to be on the horizon, the feel good factor is likely to last," Madden added.

US President Donald Trump on Wednesday pulled back from the brink of war with Iran, saying Tehran appeared to be "standing down" after firing missiles -- without causing casualties -- at US troops based in Iraq.

The comments cooled what threatened to become an uncontrolled boiling over of tensions after Trump ordered the killing last Friday of a top Iranian general, Qasem Soleimani.

Oil prices, which spiked briefly to four-month highs on Wednesday soon after the Iranian attack, dropped back below their start point compared with overnight in New York on the softer tone from both sides.

On Wall Street, the Nasdaq hit another record high Wednesday and the Dow joined London in adding on a half percent in early trading after Tokyo and Hong Kong had added around two percent and Shanghai 0.9 percent.

Frankfurt led European gains as the DAX was holding a 1.3 percent gain two hours before the close.

The rush to riskier investments saw gold, seen as a haven in times of unrest, sink more than one percent, having broken $1,600 per ounce for the first time in seven years.

"Assuming Iran-US tensions continue to simmer rather than boil, markets are likely to refocus on the global growth outlook and on trade, with the interim US-China trade deal expected to be signed on 15 January," said National Australia Bank's Tapas Strickland.

The lowering of tensions will allow traders to turn their attention to the release Friday of US jobs data, which will provide the latest snapshot of the world's number one economy, with recent figures indicating it remains robust.

Also in focus is the upcoming earnings season, which kicks off this month.

In London meanwhile, the pound slid around half-a-percent versus the dollar and euro after Bank of England governor Mark Carney said Britain's economic recovery was "not assured" despite a drop in Brexit uncertainties.

"Although the risk of a semi-hard Brexit at the end of 2020 will continue to hang over the UK, the sweeping 12 December election win for (Prime Minister Boris) Johnson and his Conservative Party has brought much of the damaging uncertainty of recent years to an end," said Kallum Pickering, senior economist with Berenberg as he forecast a real growth pickup from 1.3 percent in 2019 to 1.8 this year and 2.1 in 2021.

Key figures at 1500 GMT

London - FTSE 100: UP 0.5 percent at 7,612.96 points 

Frankfurt - DAX 30: UP 1.3 percent at 13,487.25

Paris - CAC 40: UP 0.3 percent at 6,048.11

New York - Dow: UP 0.4 percent at 28,874.91

EURO STOXX 50: UP 0.7 percent at 3,799.72

Tokyo - Nikkei 225: UP 2.3 percent at 23,739.87 (close)

Hong Kong - Hang Seng: UP 1.7 percent at 28,561.00 (close)

Shanghai - Composite: UP 0.9 percent at 3,094.88 (close)

Pound/dollar: UP at $1.3053 from $1.3126 at 2200 GMT

Euro/pound: UP at 85.09 pence from 84.97 pence 

Euro/dollar: DOWN at $1.1109 from $1.1153 

Dollar/yen: UP at 109.48 from 108.44 yen

Brent Crude: DOWN 0.2 percent at $65.29 per barrel

West Texas Intermediate: DOWN 0.1 percent at $59.51 per barrel

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