By Ryan Vlastelica

NEW YORK (Reuters) – Stock markets around the world rallied on Tuesday while the U.S. dollar fell after the new Greek government dropped calls for a write-down of its foreign debt, easing concerns about growing instability in the euro zone.

The government, led by the left-wing Syriza party that won elections just over a week ago, on Monday ditched calls for a reduction of foreign debt and proposed ending a standoff with its official creditors by swapping the debt for new growth-linked bonds.

Equities were also supported by a jump in oil prices, which are on track for their fourth straight daily gain, having risen nearly 15 percent over that period. The commodity was boosted by the decline in the dollar as well as encouraging manufacturing data in the U.S.

“The market is beginning to see signs of some stability coming into oil and the Greek situation seems to be tilting towards the side of what the market is looking for, which is a retreat from its call for a debt writedown,” said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.

The MSCI International ACWI Price Index <.MIWD00000PUS> rose 0.7 percent, while the pan-European FTSEurofirst 300 index <.FTEU3> rose 0.8 percent. The Greek banking index <.FTATBNK> soared 18 percent while Greek bond yields fell sharply, with 10-year yields down nearly 115 basis points at 10.26 percent.

The Dow Jones industrial average <.DJI> rose 195.68 points, or 1.13 percent, to 17,556.72, the S&P 500 <.SPX> gained 17.15 points, or 0.85 percent, to 2,038 and the Nasdaq Composite <.IXIC> added 22.73 points, or 0.49 percent, to 4,699.42.

The benchmark 10-year U.S. Treasury note was down 21/32, the yield at 1.7437 percent.

The U.S. dollar index <.DXY> fell 0.6 percent against a basket of currencies, while the euro was up 0.8 percent. The yen was flat against the dollar. The Aussie dollar skidded 1.4 percent lower against the greenback after Australia unexpectedly cut interest rates.

U.S. crude futures rose 3.3 percent to $ 51.21 per barrel while Brent crude added 2.8 percent to $ 56.29 per barrel. Despite the rise, both remain down about 50 percent from highs reached in June. U.S. shares of BP Plc rose 2.4 percent to $ 40.82 after the company announced a 13 percent reduction in capital expenditure for 2015, adding to cuts in investment in the sector.

Gold , which is seen as a safe-haven investment, fell 1 percent on the day while silver was down 0.1 percent. Copper surged 2.6 percent.

Earlier, Asian shares sagged on growth concerns. MSCI’s broadest index of Asia-Pacific shares, excluding Japan <.MIAPJ0000PUS>, dipped 0.2 percent after weak U.S. data added to concerns about the state of the global economy. Japan’s Nikkei <.N225> closed down 1.3 percent.

(Editing by James Dalgleish)