U.S. stock indexes rallied for a third straight day, putting the $S&P 500 index(.SPX.US)$ on pace for its biggest weekly gain since late 2020.

Stocks started Thursday nearly unchanged, but pushed into the green late in the morning, with gains accelerating into the end of the session. Indexes finished near their highs of the day.

The moves suggest traders are beginning to reassess the impact that the war in Ukraine will have on the U.S. stock market. Notably, stocks held on to gains despite a surge in crude prices, with investors saying that they are taking oil market gyrations spurred by the war in greater stride. Some investors said they were instead focusing on the improving value of U.S. stocks.

"It may stay volatile until Russia gets a little clearer, but underneath this is really good fundamentals," said Jim Paulsen, chief investment strategist at the Leuthold Group.

The S&P 500 finished the session up 1.2%, or 53.81 points, at 4411.67. It has climbed nearly 5% so far this week, which would represent its biggest weekly gain since November 2020. The broad-market gauge rallied more than 2% on both Tuesday and Wednesday. On Thursday, all 11 of the S&P 500's sectors were in the green.

The tech-heavy $Nasdaq Composite Index(.IXIC.US)$ rose 1.3%, or 178.23 points, to 13614.78. The $Dow Jones Industrial Average(.DJI.US)$ added 1.2%, or 417.66 points, to 34480.76.

Some of the biggest market moves were in oil, which has been highly volatile because the war stands to curtail Russia's role as a major oil supplier. The $Crude Oil Future Main(MAY2)(CLmain.US)$ added 8.4% Thursday to close at $102.98 a barrel. Brent crude, the global benchmark, rose 8.8% to end at $106.64 a barrel.

The S&P 500 energy sector was up roughly 3.5%. $Devon Energy(DVN.US)$ jumped 9.6%, or $5.06, to $57.52. $Occidental Petroleum(OXY.US)$ climbed 9.5%, or $5.02, to $58.01. $Marathon Oil(MRO.US)$ rose 6.9%, or $1.48, to $23.07. $Diamondback Energy(FANG.US)$ advanced 6.6%, or $8.25, to $133.88.

Oil recently traded above $130 a barrel, versus roughly $90 before the war broke out. Traders have been trying to define a new range for oil prices during the war, according to Jason Ware, chief investment officer at Albion Financial Group.

Any time you get a jolt, it's going to rattle equity markets and it's going to take some time for stocks to discount this new environment 

-Mr. Ware said.

Stocks have begun to stage a comeback in recent days after a punishing downdraft this year. Investors said they were focusing on the resumption of cease-fire talks between Ukraine and Russia but reports citing little progress weighed on sentiment.

This shows that we're not at the end of this conflict -- that the commodity price situation is not going to improve -- which makes it tougher for sentiment.

-said Esty Dwek, chief investment officer at FlowBank

Recent gains came as the Federal Reserve said it would lift interest rates for the first time since 2018 to combat inflation, which is running at a four-decade high. The central bank also penciled in six more rate increases this year.

Although the central bank's stance has become more hawkish, it "wants to try to engineer a soft landing, and that's actually quite a positive outcome for equities," said Adrian Zuercher, the head of global asset allocation at UBS's chief investment office.

Mr. Zuercher pointed to signs that the Fed was willing to tolerate inflation overshooting its 2% target -- most officials now see core inflation ending the year at 4.1% -- as indicating that policy makers were focused on not scuttling the economic recovery.

The yield on the benchmark 10-year Treasury note rose slightly, closing at 2.192% from 2.185% on Wednesday, marking four straight days of rises. Yields rise when prices fall. Selling of shorter-dated bonds, which are more heavily affected by changes in monetary policy, also eased with the two-year yield declining to 1.939% after climbing for eight trading sessions.

Weekly jobless claims in the U.S. came in at 214,000, a decrease from the previous week and in line with economists' expectations. The proxy for layoffs has been hovering close to historically low levels amid the tight labor market.

Government bonds typically perform well in times of slower economic growth, which some investors now expect due to the Fed's plans to tighten the economy. "There's also an element of risk-off from the conflict," said Ms. Dwek.

Traders said they still have concerns about longer-term energy supplies and that the shunning of Russian oil by shipping companies and banks is hitting the market now due to preplanned trades ahead of the invasion. The International Energy Agency said in a Wednesday report that sanctions on Russia could create a supply shock.

The price of gold, a traditional haven asset, climbed 1.8%, or $34.10, to settle at $1,942.10 a troy ounce, breaking a four-session losing streak.

The pan-continental Stoxx Europe 600 closed 0.5% higher. The Russian stock exchange remained closed.

The Bank of England raised its key policy rate to 0.75% from 0.5%, marking its third straight hike in as many meetings. The central bank said that economic growth in Britain was likely to slow due to higher energy prices and softened its guidance for further monetary tightening, investors said.

Chinese shares rallied for a second day, with Hong Kong's Hang Seng Index advancing more than 7% and the Shanghai Composite Index rising 1.4% to finish the day.

Key equity indexes in Australia and South Korea finished up more than 1% in Thursday's session, while Japan's Nikkei 225 closed up 3.5%.