* Oil dips on prospects deal to boost supply, but settles flat
* World share markets gain on hope Iran deal to boost growth
* Yen drops to six-month low vs dollar as Nikkei surges
By Herbert Lash
NEW YORK, Nov 25 (Reuters) - The dollar strengthened and world equity markets rose on Monday on expectations that the deal to curb Iran's nuclear program will ease Mideast political tensions and help lift global economic growth.
The breakthrough accord reached over the weekend in Geneva halts Iran's most sensitive nuclear activities and gives it some relief from crippling sanctions, but does not allow the OPEC member to boost oil sales for six months.
Brent crude fell but trimmed its losses to settle near flat on the view that the accord will not immediately increase world oil supplies. Oil had fallen nearly 3 percent at one point.
The interim pact - aimed at easing a decades-old stand-off between Iran and the United States - won the critical endorsement of Iranian cleric Supreme Leader Ayatollah Ali Khamenei. France, Britain, China, Russia and Germany also agreed to the accord.
Brent crude prices pared most losses after hitting a session low of $108.05 to settle down 5 cents at $111.00.
"The deal is a step in the right direction, but it's still very early days," said Amrita Sen, chief analyst at consultants Energy Aspects in London.
"That's why, after the knee-jerk reaction, the market is stabilizing. It's realizing, at least in the next few months, there's not going to be a substantial increase in oil exports."
Equity markets in Europe also pared gains, and Wall Street ended the day little changed. The Dow and Nasdaq indices edged less than one-tenth of a percentage point higher while the benchmark S&P 500 closed a tad lower.
European airline stocks and French carmakers, in particular, received a boost from the nuclear deal with Iran, which also sent Germany's DAX to a record high.
French car makers PSA Peugeot Citroen and Renault , which had a significant exposure to the Iranian car market before Western sanctions against Tehran were toughened, gained 5.1 percent and 1.4 percent, respectively.
The pan-European FTSEurofirst 300 of leading regional shares closed up 0.41 percent at 1,302.24 while global equity markets, as measured by MSCI's all-country world index of 45 countries, rose a scant 0.05 percent.
The Nasdaq closed below 4,000 after topping the mark in intraday trading for the first time since September 2000, when the index plunged from record highs after the tech bubble burst earlier that year.
The Dow Jones industrial average closed up 7.77 points, or 0.05 percent, at 16,072.54. The S&P 500 fell 2.28 points, or 0.13 percent, to 1,802.48 and the Nasdaq Composite added 2.924 points, or 0.07 percent, to 3,994.573.
Energy shares were by far the weakest on the day, dropping 0.83 percent. A majority of the 44 components of the index were lower. Oilfield service company Schlumberger Ltd was the biggest drag, down 3.15 percent at $89.81.
"Less tension in the Middle East is always a positive, and any drop in gas prices will essentially act as a tax break for consumers going into the holiday shopping season," said Jeff Duncan, chief executive of Duncan Financial Management in St. Louis. "This is a real benefit for the economy."
U.S. trading is expected to be light this week, with markets closed on Thursday for the Thanksgiving holiday and closing early on Friday.
In Japan, a major oil importer, shares got an extra boost from a weaker yen, surging 1.5 percent. The Nikkei average has gained almost 11 percent in a little more than two weeks.
The Japanese currency, which typically falls when share prices rise, had touched a sixth-month low of 101.91 yen to the dollar as investors sold it to buy higher-yielding assets elsewhere.
The dollar last traded up 0.3 percent at 101.57 yen, while the euro slid 0.33 percent against the dollar to $1.3513.
The fall in oil prices weighed on most commodity-linked currencies, with the Canadian dollar dropping to a 4-1/2-month low of C$1.0584. Against an index of six major currencies, the dollar was 0.25 percent higher.
U.S. crude settled down 75 cents at $94.09 a barrel.
Prices of U.S. Treasuries edged up slightly as housing data proved weaker than expected.
Contracts to buy previously owned U.S. homes fell for a fifth straight month in October, hitting a 10-month low and adding to signs of cooling in the housing market. The 10-year U.S. Treasury note rose 4/32 in price to yield 2.7355 percent.
German Bunds rose after European Central Bank policymakers said there was room for more interest rate cuts as the prospect of lower oil prices after the Iran deal added to a low inflation outlook.
German Bund futures settled 37 ticks higher at 141.32, pushing 10-year German yields 2.8 basis points lower to 1.73 percent.
Trending On Reuters
Greece Debt Crisis
Greece's outspoken finance minister resigned on Monday, removing a major obstacle to any last-minute deal to keep Athens in the euro zone after Greeks voted resoundingly to reject the austerity terms of a bailout. Read | Opinion: Greece will struggle to stay in euro