The possibility of an early resolution to the Persian Gulf War boosted stock prices and the U.S. dollar on worldwide markets yesterday, while oil prices headed lower.

The markets reacted largely to a 3 1/2-hour meeting between Soviet President Mikhail Gorbachev and Iraqi Foreign Minister Tariq Aziz in Moscow.

Although few details of the talks were released, the prospect of peace sparked buying interest on major global stock markets and in the dollar in foreign exchange. U.S. markets were closed for the Presidents' Day holiday.

In Tokyo, the stock exchange's key index soared to a six-month high in brisk trading.

The Nikkei average of 225 selected issues gained 886.27 points, or 3.50 percent, to close at 26,230.01. It was the first time the market's main barometer had closed above 26,000 points since Aug. 21, when it closed at 26,297.84 points.

Tokyo's rise helped push up prices on the London Stock Exchange. The Financial Times-Stock Exchange 100 index closed up 21.4 points, or 0.9 percent, at 2,318.3.

However, volume was off from Friday, with many investors reluctant to play the market without any lead from Wall Street.

London trading also was slightly dampened by bomb explosions at two London railway stations, which prompted the closing of all British rail stations in the capital, disrupting the morning rush hour.

Stocks also rose sharply in Frankfurt, where the German stock index picked up 41 points, or 2.7 percent, and closed at 1,572.31.

In foreign exchange, the dollar gained ground against major currencies in Europe and Tokyo. Gold prices fell.

Currency dealers said an end to the fighting in the Persian Gulf would help aid U.S. deficit-cutting efforts and thereby the economy and dollar.

The dollar gained ground against the British pound in London, with sterling falling to $1.9600 from $1.9680 late Friday, and rose in Frankfurt, where it was worth 1.4845 German marks, up from 1.4765.

Earlier, in Tokyo, the dollar rose 0.29 yen to a closing 129.95 yen. It was quoted in London at 130.45 yen.

Gold fell in London to a late bid price of $363.00 a troy ounce from $365.25 an ounce late Friday. Gold fell in Zurich to $364 an ounce from $364.85, and in Hong Kong to $365.98 an ounce from $369.97.

Silver bullion fell in London to a late bid price of $3.78 a troy ounce from Friday's $3.84.

In the oil markets, the April contract for North Sea Brent Blend, a light, sweet crude oil traded in Europe, fell 54 cents to $16.50 a barrel on the International Petroleum Exchange in London.

In Tokyo, it traded for $16.80 and $17 a barrel.