By Sinéad Carew and Tom Wilson

NEW YORK/ LONDON, April 10 (Reuters) - Stocks advanced modestly on Friday while the dollar was lower as investors waited hopefully for U.S./Iran talks scheduled for the weekend after U.S. inflation data surged in line with expectations on soaring energy prices.

Investor hopes for a break in Middle East hostilities had been boosted when Israel said on Thursday that it was seeking talks with Lebanon. Iran has cited Israel's continuing attacks on Lebanon as a key sticking point in its ceasefire agreement with the United States, which requires Iran to reopen the Strait of Hormuz, through which roughly a fifth of global energy supplies are shipped. Tehran and Washington delegations are due to meet in Pakistan on Saturday.

Meanwhile the latest inflation report showed that U.S. consumer prices increased by the most in nearly four years in March as the war boosted oil prices and the pass-through from tariffs persisted, further diminishing chances for Federal Reserve interest rate cut this year.

"The market was braced for a hot print, so today's in line number is a slight relief. However, it may be the best headline inflation number we see for a while as it may only partially capture the full force of the Iran conflict," said Alexandra Wilson-Elizondo, global co-CIO of multi-asset solutions at Goldman Sachs Asset Management, while she noted that the U.S. economy has become less oil intensive since the 1970s.

And with wage growth decelerating to levels consistent with the inflation target, and long-term inflation expectations staying anchored, Wilson-Elizondo sees the Fed looking through "energy-driven noise so long as these factors hold" and staying patient.

On Wall Street at 11:00 a.m. ET (1500 GMT), the Dow Jones Industrial Average was down 144.77 points, or 0.30%, at 48,041.03, the S&P 500 rose 12.98 points, or 0.19%, to 6,837.35 and the Nasdaq Composite rose 157.74 points, or 0.69%, to 22,980.48.

MSCI's gauge of stocks across the globe rose 4.22 points, or 0.41%, to 1,036.85.

The pan-European STOXX 600 index rose 0.46%.

Underscoring growing relief, the CBOE volatility index extended losses after closing below pre-war levels for the first time on Thursday. It was last down 1.5 points at 19.19.

Earlier MSCI's broadest index of Asia-Pacific shares outside Japan added 0.9% to put it up 7.3% for the week, its biggest advance since November 2022. In a sign that the Middle East conflict is putting cost pressure on the world's second-largest economy, China's factory-gate prices rose for the first time in 3-1/2 years in March, official data showed earlier.

With the Strait of Hormuz still largely closed to shipping and on concerns persisting over supplies from Saudi Arabia, oil futures were up modestly. Ship-tracking data showed on Friday that the majority of ships that have sailed through the Strait in the past day were linked to Iran.

U.S. crude rose 0.6% to $98.54 a barrel and Brent fell to $95.86 per barrel, down 0.08% on the day.

In currencies, the dollar slipped on Friday, putting it on track for its largest weekly drop since January, as investors sold safe-haven assets on the assumption that oil shipping will resume if a ceasefire holds in the Gulf.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.22% to 98.65, with the euro up 0.24% at $1.1727.

Against the Japanese yen, the dollar strengthened 0.11% to 159.11.

In U.S. Treasuries, yields edged slightly higher after the U.S. inflation reading and ahead of the peace talks.

The yield on benchmark U.S. 10-year notes rose 1.2 basis points to 4.305%, from 4.293% late on Thursday while the 30-year bond yield rose 1.2 basis points to 4.9101%.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 0.6 basis points to 3.789%, from 3.783% late on Thursday.

In precious metals, spot gold rose 0.24% to $4,775.16 an ounce while spot silver rose 1.6% to $76.27 an ounce.

(Reporting by Sinéad Carew in New York, Siddarth S in Bengaluru, Tom Wilson in London and Gregor Stuart Hunter in Singapore; Editing by Hugh Lawson, Kirsten Donovan)