By Utkarsh Hathi and Purvi Agarwal

July 10 (Reuters) - Most emerging market stocks and currencies gained on Friday, with those in Asia driven by optimism around AI, while investors assessed developments in the Middle East that put stocks on track for weekly declines.

MSCI's global EM stocks index .MSCIEF rose 0.8%, with gains largely driven by tech-heavy Asian bourses, ahead of South Korean chipmaker SK Hynix's 000660.KS U.S. market debut, which will test AI demand and set the tone for the sector before quarterly earnings.

South Korea's benchmark KOSPI .KS11 advanced 2.5%, while Hong Kong's benchmark Hang Seng .HSI rose 0.6%, registering their sharpest weekly gain in nine months.

Earlier this week, a global pull-back in tech over worries of lofty valuations limiting the rally and renewed Middle East tensions after U.S. President Donald Trump said an interim deal with Iran was "over", weighed on risk appetite and put the stock index on track for weekly declines.

"Midterms matter for Trump, and he is inclined to get a deal to keep a lid on oil prices.... if we get a deal which is unfavourable for the US, post midterms, we could see renewed escalation in the Middle East," said Mohit Kumar, chief European economist at Jefferies, referring to midterm elections to the U.S. Congress in November.

On Friday, other EM stocks also advanced with Polish blue-chip stocks .WIG20 up 1.5% and Hungary's benchmark .BUX added 0.4%.

Romania's .BETI edged 0.3% higher, swinging between gains and losses for the week. It could snap a five-week winning streak if it closes lower for the week.

South African equities .JTOPI gained 0.3%, but a decline in metal prices such as gold weighed on miners, limiting the rise of the index. Turkish stocks .XU100 added 1.3%.

On the currencies front, the MSCI index .MIEM00000CUS gained 0.1%, and was headed for a modest weekly advance.

Currencies in Asia were mixed against the dollar. South Africa's rand ZAR= and Turkey's lira TRYTOM=D3 were little changed.

Most emerging European currencies traded lower against the euro, with the Polish zloty PLN= and the Hungarian forint HUF= depreciating 0.3% each.

Poland's central bank expects inflation to be on a slightly higher path than its previous prediction because of the Middle East conflict, while central banker Henryk Wnorowski said it was too early to decide on a rate cut in September.

Investors took cues from last week's weaker-than-expected jobs report in the United States, which pointed to a stable labour market and prompted investors to pull back on some bets on imminent interest rate hikes from the Federal Reserve.

Elsewhere, the yen bounced on news that Japan plans to encourage pension funds to increase their holdings of domestic financial assets, a move analysts said could offer more support to the battered currency than intervention.

HIGHLIGHTS:

** Fuel markets flash supply crunch despite calmer oil prices

** Turkey's inflation uptick poses risks to near term outlook, says central bank governor

** Flows to India equity mutual funds rebound from one year-low, AMFI data shows

For TOP NEWS across emerging markets nTOPEMRG

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB