* Fed seen delaying rate hike after weak jobs data

* U.S. dollar rises in a rebound

* Oil climbs sharply but still well off recent peak (Updates to close of U.S. trading)

By Ryan Vlastelica

NEW YORK, April 6 (Reuters) – U.S. stocks rose on Monday after a weaker-than-expected jobs report drove expectations that the Federal Reserve will postpone its first interest rate increase in nearly a decade.

Trading was volatile and volumes were low as major European markets were closed for the Easter holiday. Major indexes opened lower before rebounding to rise as much as 1 percent. In currency markets, the U.S. dollar index moved between a decline of 0.2 percent and a rise of 0.7 percent, and Wall Street equities came off their highs as the dollar strengthened in the afternoon.

The U.S. stock market was closed on Friday when the March jobs report was released.

The Labor Department reported that 126,000 jobs were created in March, well below economists’ expectations and the fewest added in more than a year. Also highlighting weakness in the jobs market, data from the Institute for Supply Management on Monday showed the pace of growth in the U.S. services sector fell to a three-month low in March.

The data pointed to a loss of momentum in U.S. growth and suggested the Fed, which some have thought could raise rates as soon as June, may push back its first rate hike until later in the year. This view was supported by the president of the New York Fed, William Dudley, who said on Monday the U.S. central bank would need to determine whether the jobs report foreshadowed a more substantial slowing in the labor market. He said he expects the path of rate hikes to be “relatively shallow.”

“There’s some relief that the weak report points to more patience by the Fed and possibly an end to the strength in the dollar, which has been a real problem for growth,” said Hayes Miller, the Boston-based head of asset allocation in North America at Baring Asset Management.

Expectations the Fed will raise rates this year have fueled the dollar’s rally since mid-2014, though recent weak data has eased concerns it would strengthen further.

The U.S. dollar index, which measures the greenback against a basket of currencies, rose 0.5 percent on Monday. Even so, the index’s recent trend has been weak, down nearly 2 percent over the final three trading sessions of last week.

The euro fell 0.3 percent while the yen fell 0.4 percent against the dollar.

The strong dollar has been a big concern on Wall Street, with worries that the earnings of multinational corporations will take a big hit when overseas profits are translated into dollars.

The Dow Jones industrial average rose 117.61 points, or 0.66 percent, to 17,880.85, the S&P 500 gained 13.66 points, or 0.66 percent, to 2,080.62, and the Nasdaq Composite added 30.38 points, or 0.62 percent, to 4,917.32.

MSCI’s all-country world index, a measure of stock performance in 46 countries, rose 0.6 percent.

U.S. Treasury debt prices fell, giving up gains registered on Friday on the unexpectedly weak payrolls report. The price of U.S. 10-year Treasuries fell 18/32, pushing up yields to 1.8969 percent.

Gold prices rose 0.4 percent, also fueled by expectations the Fed could delay a rate increase, while silver fell 0.1 percent. Copper fell 1.1 percent.

Oil soared as traders reassessed how quickly Iran might increase exports after a preliminary nuclear deal and anticipated that a months-long rise in U.S. crude inventories may be slowing.

U.S. crude prices remain down more than 50 percent from a peak hit in June, with oversupply a key driver. While an agreement with Iran would add to supply, “People betting on Iran’s oil arriving tomorrow realize they may have to wait up to a year,” said Phil Flynn, analyst at Price Futures Group in Chicago.

Brent crude for May delivery leaped 5.8 percent to settle at $ 58.12 a barrel. U.S. crude for May delivery jumped 6.1 percent to settle at $ 52.14.

(Editing by James Dalgleish and Leslie Adler)