Oil nursed its sharpest fall in two-and-a-half months on demand worries and the lack, so far, of an obvious Israeli or US response to Iran's weekend attack.

Analysts do not expect dramatic new sanctions on Iranian oil, although the US was set to reimpose oil sanctions on Venezuela which steadied Brent crude futures at $87.37 a barrel after Wednesday's $2.70-a-barrel drop.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent but regional moves were uneven, with gains in South Korea and Australia but falls elsewhere. Japan's Nikkei fell 0.4 percent and with a drop of 4.3 percent so far this week is eyeing its largest weekly loss since December 2022.

Wall Street indexes fell overnight and S&P 500 futures were flat in early Asia trade. The dollar dipped slightly overnight and news of an unusual trilateral agreement between the US, Japan and Korea to consult closely on foreign exchange left the door open to intervention to slow dollar gains in Asia.

US short-term interest rate expectations were little changed but selling of longer-dated bonds abated, and 10-year US Treasury yields fell 7.2 basis points to 4.59 percent and two-year yields retreated after touching 5 percent.

"I believe they are small pullbacks from extended moves," said Anshul Sidher, global head of markets at ANZ in Singapore, adding traders are closely watching bonds and the dollar to drive the mood.

"I'd expect [oil] to be range bound subject to [Middle East] escalations from where we are now," he said.

Australian stocks looked set to snap five consecutive sessions of losses with the ASX 200 up 0.5 percent just before midday in Sydney. On Wednesday weaker-than-expected earnings at chipmaking supplier ASML drove shares lower and Thursday's focus will be on earnings at Taiwan Semiconductor Manufacturing. TSMC shares fell 1 percent in early trade.

Stock market nerves follow a wave of bond selling and dollar buying as sticky US inflation and a shift in tone at the Federal Reserve pointed to persistently high US rates. The rates-sensitive Nasdaq is down 3 percent so far this week.

The euro is under pressure as European policymakers are readying to cut rates in two months’ time, though at $1.0665 it is off this week's five-month lows.

The Australian dollar took a small knock to $0.6435 from data showing an unexpected fall in Australian employment in March.

The yen traded at 154.22 per dollar, close to a three-decade low, and traders are eyeing a breach of 155 as a possible trigger for intervention.

"China is likely to welcome an end to yen depreciation," said Bank of Singapore strategist Moh Siong Sim in a note to clients.

"We believe the issue of whether Japan will intervene to limit yen weakness will matter to the People's Bank of China's assessment of the appropriate level to stabilize the [yuan]."

China's yuan hovered at 7.2369 per dollar. It is down 1.8 percent against the dollar this year and this week's weakening of its trading band has been taken as a signal that Chinese authorities will tolerate further softness.

Elsewhere in commodity markets European gas prices have retreated from three-month highs and sharp rallies in metal prices have paused, though not reversed.

Three-month London copper is up 12 percent this year and traded at $9,584 per tonne overnight. Singapore iron ore held gains at just over $110 a tonne.

Gold is just below last week's record high at $2,366 an ounce.

A handful of US and European central bankers speak later on Thursday. US jobless claims data is due and earnings at Blackstone and Netflix will be closely watched.