The renewed back-and-forth attacks have further eroded the fragile three-week-old ceasefire, bringing the spotlight back on oil prices and what they could mean for inflation and the global rates outlook.

Japan's bond market and currency lurched higher after Finance Minister Satsuki Katayama said on Friday the government wants to explore ways to encourage pension funds, including the Government Pension Investment Fund (GPIF), to increase their holdings of domestic financial assets.

Brent crude futures were set for a 5 percent week-on-week rise, the strongest weekly performance since early May. But at $76.03 per barrel, Brent has given up most of the gains it picked up when the conflict began at the end of February.

"I'm looking at updates from the Middle East and things don't look good, but investors seem incredibly resilient to those risks at the moment, with tech again driving markets higher," said Nick Twidale, chief market strategist at ATFX Global in Sydney.

Japan's Nikkei rose 1.8 percent while South Korea's KOSPI, the epicenter of the AI rally, gained 4 percent. Chip bellwethers SK Hynix and Samsung Electronics were up 1 percent and 3 percent, respectively, while Taiwan markets were closed due to a typhoon.

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That left the MSCI's broadest index of Asia-Pacific shares outside Japan 1.3 percent higher.

"We will start on the front foot again in Asia, but I'm still very cautious that we are not pricing in enough event risk that the Strait of Hormuz may be closed again in the coming days," Twidale said.

Investors have taken the escalation in stride this week, keeping their focus instead on the AI theme that has propelled global stocks to record highs but spurred worries about the sustainability of the red-hot rally.

Overnight, the tech-heavy Nasdaq ended sharply higher after Micron Technology's plans to invest more than $250 billion in the US through 2035 buoyed chip stocks, with the Philadelphia SE Semiconductor Index rising 3 percent.

SK Hynix US debut awaits

Attention will be on SK Hynix's US market debut later on Friday after the firm priced its American Depositary Receipts at $149 on Thursday, raising about $26.5 billion, indicating strong investor appetite to gain exposure to the AI supply chain.

The blockbuster offering, which will finance new factories and equipment to meet surging AI chip demand, is set to be the world's second-biggest share sale after SpaceX's record-breaking IPO last month.

Sam Konrad, investment manager for Asia Equity Income at Jupiter Asset Management, said the listing could mean that the SK Hynix ADR trades at a premium to the local shares, but it could still help re-rate the South Korean-listed shares.

"If SK Hynix re-rates, that should help support a re-rating in Samsung Electronics too, especially when they release details of their shareholder return plans," said Konrad, who holds shares in both South Korean firms.

SK Hynix's South Korean shares have surged an eye-popping 238 percent this year, taking the broader benchmark to record highs and making the KOSPI the world's best-performing major stock market since the start of 2025.

But the AI mania has also spurred sharp swings in recent weeks as investors fret about sky-high valuations and worry about the sustainability of their massive profit growth.

In currency markets, all eyes remained on the Japanese yen, which hung around its lowest level in 40 years as traders kept a watch for official intervention from Tokyo.

The yen got a lift from Katayama's comments and was last 0.5 percent firmer at 161.51 per US dollar.

The dollar otherwise was mostly muted as investors awaited catalysts to gauge the path of US interest rates. Traders are pricing in 34 basis points of hikes for the year but that may change depending on the inflation pressure from the war.

In commodities, gold looked set to post a 1 percent decline for the week and was last at $4,113 per ounce in early trading.

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