NEW YORK—Wall Street rallied Monday as oil prices, supported by a stronger dollar, fell back and alleviated some of investors’ concerns about accelerating inflation. The Dow Jones industrials gained 130 points.

The dollar’s advance, a break from the greenback’s long losing streak, also helped soothe some of Wall Street’s worries about inflation’s impact on consumer spending. The dollar’s gain helped send light, sweet crude oil down $1.73 to settle at $124.23 per barrel on the New York Mercantile Exchange. Oil briefly reached a new trading high of $126.40, but investors seemed shy, ...