GLOBAL MARKETS-Oil craters, stocks rally as Trump says Iran talks underway

By Karen Brettell and Dhara Ranasinghe

NEW YORK, March 23 (Reuters) - Oil plunged and global stocks rebounded from a four-month low on Monday after U.S. President Donald Trump said he would postpone military strikes against Iranian energy infrastructure and said the U.S. was in talks with Tehran to end the war — a claim Iran quickly denied.

Trump wrote early in the U.S. morning on his Truth Social platform that the U.S. and Iran had held "very good and productive" conversations about a "complete and total resolution of hostilities in the Middle East".

As a result, he said, he was postponing a plan to hit Iran's energy grid for five days.

Oil prices tumbled by more than 13%, the dollar fell against other major currencies and government borrowing costs eased.

"You never know who to believe but it does appear that Trump is trying to start discussions with somebody in Iran to resolve the war despite strong denials from Iran," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

"This has caused significant optimism in stock prices today with the market up strongly although off its highest levels because of the Iranian denials."

IRANIAN MEDIA CONTRADICT TRUMP'S COMMENTS

U.S. crude CLc1 was last down 9.61% to $88.84 a barrel and Brent LCOc1 fell to $99.90 per barrel, down 10.94% on the day.

The Russell 2000 small-cap index .RUT gained 2.5%.

The Dow Jones Industrial Average .DJI rose 631.00 points, or 1.38%, to 46,208.47, the S&P 500 .SPX rose 74.51 points, or 1.15%, to 6,580.99 and the Nasdaq Composite .IXIC rose 299.15 points, or 1.38%, to 21,946.76.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 4.93 points, or 0.50%, to 986.24. It earlier reached 970.45, the lowest since November 21.

The pan-European STOXX 600 .STOXX index rose 0.61%.

INVESTORS TRIM RATE HIKE EXPECTATIONS

Britain's 2-year bond yield, which has borne the brunt of a bond selloff since the start of the conflict, fell 17 basis points on the day to 4.409%. The 10-year yield dropped from its highest since 2008.

Investors trimmed their bets on Bank of England rate hikes, now pricing in two hikes by year-end versus more than three earlier on Monday, while they also cut expectations for the European Central Bank.

In the U.S., two-year and 10-year Treasury yields were 4 to 5 basis points lower, with the 10-year yield last at 4.348%. US10YT=RR

The dollar was broadly soft, having traded higher against most other currencies until the headline hit. The euro EUR= was last up 0.37% at $1.1613.

"(The market) is not saying that the worst is over, but that the odds that the worst will manifest itself in the next couple of days have gone down," said Steven Englander, head of global G10 FX research and North America macro strategy at Standard Chartered in New York.