A short-lived pullback in oil came after the Wall Street Journal reported that the International Energy Agency has proposed the largest release of oil reserves in its history to bring down crude prices, providing some relief to battered global stocks while currencies and bonds were little changed.

Brent crude futures swung between gains and losses to trade 0.2 percent higher at US$87.89 per barrel, while US crude was little changed at $83.47 a barrel, having initially fallen on the news.

The conflict in the Middle East kept investors nervous, as the United States and Israel pounded Iran in what some called the most intense airstrikes of the war, dashing some earlier hopes of an imminent end to hostilities.

“This news on the strategic reserves being released is welcomed by the market, because then, in the case of a short conflict, there is enough oil to avoid any rationing or economic impact,” said Frank Benzimra, head of Asia equity strategy and multi-asset strategist at Societe Generale.

“But it's going to remain uncertain [...] it's very, very unpredictable.”

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Still, global stocks found some reprieve, with MSCI's broadest index of Asia-Pacific shares outside Japan up 1.6 percent, while the Nikkei rose 2.1 percent.

South Korea's Kospi advanced 3.2 percent.

US stock futures also pushed higher after a mixed cash session overnight, with Nasdaq futures and S&P 500 futures adding 0.4 percent each.

Euro STOXX 50 futures slipped 0.3 percent.

Markets are on edge as the Middle East conflict threatens to freeze global energy trade and ignite a price shock — a risk that world leaders are scrambling to address.

Still, energy markets remain hostage to how long — and how intense — the conflict becomes.

“Several major questions loom over the oil market's trajectory. Chief among them is the timing of safe passage for vessels through the Strait of Hormuz, a critical chokepoint for global oil supply,” said Kerstin Hottner, Vontobel's head of commodities.

“Another concern is the possibility of infrastructure damage [...] Even if major hostilities subside, the prospect of ongoing low-level Iranian drone attacks on energy infrastructure could prolong market instability into next year.”

Dollar fever

The dollar held to its gains on Wednesday as investors continued to assess the fallout from the war, with the greenback proving the safe-haven asset of choice in the ongoing market turmoil.

Against the yen, the dollar was up 0.1 percent at 158.25, while the euro and sterling were nursing losses and fetched $1.1624 and $1.3440, respectively.

“You have only one safe asset, which has been the US dollar,” said SocGen's Benzimra.

“Even gold or Treasuries did not play this huge safe haven role. In the case of Treasuries, because of the inflation concerns, and in the case of gold, because we could see some investors selling their gains in gold to offset some losses in the equity market.”

Bond markets have come under pressure over the past few sessions on risks that the prolonged spike in energy prices could stoke inflation and cause central banks across the globe to turn more hawkish.

US Treasuries steadied on Wednesday, with the yield on the benchmark 10-year note little changed at 4.1460 percent, while the two-year yield was at 3.5796 percent.

“The general tone of central banks will remain hawkish so long as the threat of the war's inflationary implications persist,” said Thierry Wizman, global FX and rates strategist at Macquarie Group.

“We would expect that this more hawkish disposition persists even after hostilities end, largely because the data may continue to point to inflationary pressures throughout the period in which inflation may show up in the data.”

February's US inflation reading is due later on Wednesday.

In precious metals, spot gold was up 0.5 percent at $5,215.60 an ounce.

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