* European shares close near 2-year highs
* Wall Street mixed after Trump fires FBI director
* Dollar rises after U.S. yields rebound following weak auction
* Greek yields lowest since 2012 debt restructuring (Updates to U.S. market close, adds quote, data)
By Dion Rabouin
NEW YORK, May 10 (Reuters) - Oil prices rebounded on Wednesday after the largest one-week drop in U.S. crude inventories this year, helping fuel a modest rise on Wall Street, while European stocks closed near their highest in almost two years.
U.S. stocks were pulled higher by energy shares, with the S&P energy index gaining 1.06 percent.
Oil prices rose after Iraq and Algeria joined Saudi Arabia in supporting an extension to OPEC supply cuts and U.S. inventories fell more than expected.
U.S. crude rose 3.2 percent to $47.35 per barrel and Brent was last at $50.22, up 3.06 percent on the day.
Disappointing results from Dow component Walt Disney dragged on the index of 30 securities, and President Donald Trump's firing of FBI Director James Comey gave equities some pause in early trading, but stocks broadly inched higher.
Trump said he fired Comey, who had been leading an investigation into allegations Trump's 2016 election campaign may have colluded with Russia, over his handling of the email scandal.
"The market has been unusually stable for a long period; we’ve had a long stretch of not many big moves up or down," said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois.
"The market has been able to absorb a lot of geopolitical news, but one of these days we’ll have a big geopolitical event and we’ll have a big reaction to that."
The Dow Jones Industrial Average fell 32.67 points, or 0.16 percent, to end at 20,943.11, the S&P 500 gained 2.71 points, or 0.11 percent, to 2,399.63 and the Nasdaq Composite added 8.56 points, or 0.14 percent, to 6,129.14.
Traders said Comey's firing could lead to serious complications for the administration, but without a "smoking gun" the fallout would likely be limited. The worry, they said, was that the issue could add yet another obstacle to Trump's promised reflationary tax reform and stimulus plans.
"We were not expecting to see a quick succession of moving toward the administration's agenda, and this certainly is not reducing that contentious environment," said Eric Wiegand, a New York-based senior portfolio manager at the Private Client Reserve at U.S. Bank.
Measures of market volatility are at rock-bottom. The U.S. VIX index was just a hair above its lowest since 2006 touched on Tuesday.
A weak 10-year note auction sank demand for U.S. Treasuries , offsetting concerns about Comey's ouster from the FBI to leave yields little moved on the day.
Investors also took note of Boston Federal Reserve President Eric Rosengren's comments that the Fed should hike U.S. overnight interest rates three more times this year and start reducing its $4.5 trillion balance sheet.
The dollar benefited from Treasury yields paring losses and reversed an early fall against safe-haven currencies. The dollar was last 0.25 percent higher against the Japanese yen, touching an eight-week high. The greenback also erased losses against the safe-haven Swiss franc, and was last up 0.2 percent.
Gold fell 0.15 percent to $1,219 an ounce.
European full-year earnings forecasts, set to be their best since 2010, and centrist Emmanuel Macron's victory in France's presidential election over the weekend have steadied European bourses so far this week.
The pan-European FTSEurofirst 300 index rose 0.19 percent and MSCI's gauge of stocks across the globe gained 0.14 percent.
Greek 10-year yields on Wednesday fell to their lowest since the country's debt was restructured in 2012. Greek stocks rose for a 12th straight session, the longest streak since 1991, as Athens looked set to clinch vital bailout loans.
Reporting by Dion Rabouin; Additional reporting by Noel Randewich in San Francisco and Nigel Stephenson in London; Editing by Nick Zieminski and James Dalgleish