GLOBAL MARKETS-Stocks edge up ahead of US-China meeting; oil rallies on US-Iran stalemate

* US-Iran talks stumble, Trump says ceasefire "on life support"

* Oil settles higher, stocks rise modestly

* Iran ​on the ⁠agenda with Trump to visit China this week

NEW YORK/LONDON, May 11 (Reuters) - U.S. equity indexes inched ahead to record closing highs while the dollar edged higher on Monday, ​as ‌investors awaited a meeting between U.S. President Donald Trump and Chinese President Xi Jinping.

Oil prices rallied as Trump said the U.S. ceasefire with Iran was "on life support," after ⁠dismissing Tehran's response to a U.S. peace proposal as "stupid." His remarks stoked worries that ⁠the 10-week-old conflict will drag on, paralyzing shipping through ​the Strait of Hormuz.

Iran's response had focused on ending the war on all fronts and Tehran demanded compensation for war damage, emphasized its sovereignty over the Strait of Hormuz, and called on the U.S. to end its naval blockade, guarantee no further attacks, lift sanctions and remove a ban on ​Iranian oil ‌sales.

But, with the Middle East expected to be a key part of the agenda this week at Trump and Xi's first face-to-face talks in more than six months, Scott Wren, senior global market strategist at Wells Fargo Investment Institute, said that investors were cautiously hopeful for some progress toward peace.

"It's all about the strait and when it's going to open," said Wren. "There's some optimism that China will have some influence in resolving the ​strait issue."

On Wall Street, the S&P 500 rose 13.91 points, or 0.19%, to 7,412.84 and the Nasdaq Composite rose 27.05 points, or 0.10%, to 26,274.13, ‌record closing highs for both. The Dow Jones Industrial Average rose 95.31 points, or 0.19%, to 49,704.47, still shy of its February 10 record close.

MSCI's gauge of stocks across the globe rose 2.38 points, ‌or 0.22%, to 1,108.01. Earlier the pan-European STOXX 600 index closed up 0.11%.

In currencies, the dollar retreated from session highs after Trump's rebuff of Iran's response kept concerns about an extended war intact.

The dollar index, which measures the greenback against a basket of currencies including the yen and ​the euro, fell 0.05% to 97.96, with the euro down 0.06% at $1.1777.

Against the Japanese yen, the dollar strengthened 0.37% to 157.23.

Sterling weakened 0.16% to $1.361 as British Prime Minister Keir ‌Starmer attempted to quell a rebellion within his ruling Labour party following a mauling in last week's local elections.

In energy markets, oil prices settled up nearly 3% after Trump's comments fueled supply fears as the Strait of Hormuz stayed largely closed with no clear end in sight for the ⁠war.

U.S. crude settled ⁠up 2.78%, or $2.65 at $98.07 a barrel. Brent rose to $104.21 per barrel, up 2.88%, or $2.92 for ‌the day.

U.S. Treasury yieldsrose as rising oil prices stoked inflation worries.

The yield on benchmark U.S. 10-year notes rose 4.6 basis points to 4.41%, from 4.364% late on Friday. The 30-year bond ​yield rose 3.6 basis points to 4.9835%.

The ​2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 5.9 ‌basis points to 3.952%.

Gold prices reversed course to rise in volatile trading on Monday, as investors assessed developments in U.S.-Iran diplomacy and waited for key U.S. inflation data due later this week.

Spot gold rose 0.44% to $4,735.39 an ounce. U.S. gold futures rose 0.15% to $4,727.70 an ounce. (Reporting by Sinéad Carew, Amanda Cooper, Editing by Stephen Coates, Gareth Jones, Mark Potter, Nia Williams and David Gregorio)