European share prices stormed ahead for a second day yesterday, clocking up their best back-to-back gain in years amid growing hopes that any conflict in Iraq will be over quickly.

By contrast, US stocks ended mixed after a volatile session in which the momentum from Thursday's strong rally faded amid continued uncertainty over the Iraq crisis.

After the major indexes reversed course several times, the Dow Jones industrial average ended with a gain of 37.96 points (0.50 per cent) at 7,859.71, while the Nasdaq fell a fractional 0.53 to 1,340.24.

In Dublin, more than €1 billion was added to the value of the Irish stock market as the ISEQ index surged by 1.6 per cent on the back of the strong performance elsewhere.

Ryanair and Irish Permanent were the most notable performers on a good day for most leading stocks, gaining 9 per cent and 5 per cent respectively.

But dealers remained sceptical about the recent rally - in which the Irish market gained nearly 4 per cent since Wednesday, and its sustainability. "The problems are still out there with regard to what's going on in the Middle East," one Dublin dealer said.

In Europe, most leading markets continued to climb, with the FTSE Eurotop 300 index rising 4.4 per cent on top of Thursday's 6.1 per cent surge, its biggest ever one-day rise. In London, the FTSE 100 closed sharply higher for the second straight session, gaining more than 3 per cent with bank and drug shares providing the main push.

Insurance group Axa was the main factor behind a 7 per cent rise in French shares while German shares also closed 2 per cent higher. Analysts cautioned, however, that while the gains were substantial, they represented little more than a dot on the investment map.

Calculations by Bank of America showed that about €5.3 billion had been wiped off the value of Europe's 600 biggest listed companies since shares peaked in March 2000.

On foreign exchange markets, the dollar gained against the euro, which hit a two-week low of $1.0693, amid optimism over the latest diplomatic manoeuvring.

It also shrugged off a flood of US economic data, including the University of Michigan's March consumer sentiment index which fell for a third straight month.

Meanwhile, world oil prices slumped as investors bailed out of crude markets in anticipation that a US war against Iraq could start soon and finish quickly. - (Additional reporting by Financial Times Service, Reuters)