Updates prices

By Tom Westbrook

SINGAPORE, May 8 (Reuters) - Oil prices rose and stocks slipped as the U.S. and Iran exchanged fire in the Middle East, though many markets in Asia were still heading for stellar weekly gains as AI demand swept up chipmakers.

Benchmark Brent crude futures LCOc1 were up about 1% to $101 a barrel in the Asia day, while European stock futures STXEc1 were down 0.8%. FTSE futures FFIc1 fell 0.7%, while S&P 500 futures ESc1 rose 0.3%..N

Traders had a wary eye on Labour Party losses in British elections, which could pressure Prime Minister Keir Starmer's leadership, though sterling stayed steady at $1.3575. GBP/

The United States and Iran clashed in the Gulf and the UAE came under renewed attack in a test of a month-long ceasefire, but the warring parties downplayed the situation to leave investors hopeful of a resolution.

"The focus has still been on the strength of the earnings coming out of the U.S.," said Kerry Craig, global market strategist at J.P. Morgan Asset Management.

He said markets were also encouraged by efforts from both camps to reach a temporary deal to allow traffic through the Strait of Hormuz while they discuss a fuller peace settlement.

Stock markets in Asia, which have been soaring thanks to strong revenues and spending plans from the U.S. AI hyperscalers - which means rivers of gold for the region's chipmakers - slipped relatively slightly from record highs.

MSCI's broadest index of Asian shares outside Japan .MIAPJ0000PUS fell 0.9%, with South Korea's KOSPI .KS11 down just 0.1% and set for a weekly gain of more than 13% - the largest since 2008 - on the back of a surge in Samsung 005930.KS and SK Hynix 000660.KS.

Taiwan's benchmark is up 7% this week and Japan's Nikkei .N225 rose 5.2%.

Currency markets were broadly steady with the dollar recovering from recent lows and the yen in focus. Japan intervened in the foreign exchange market during holidays in early May to stave off further falls in the battered currency, a source familiar with the matter told Reuters. FRX/

The euro EUR= bought $1.1736, the Aussie AUD= $0.7221 and the yen JPY= was at 156.8 per dollar having struggled to sustain gains beyond 155 after surges on suspected intervention to the tune of nearly $70 billion since last Thursday.

China's yuan CNY=CFXS, Asia's best-performing currency since the war broke out, is on the cusp of strengthening past 6.8 to the dollar and sits near its strongest since 2023.

U.S. JOBS AND UK ELECTIONS IN FOCUS

Investors are awaiting the U.S. non-farm payrolls report on Friday, with jobs expected to have increased in April by 62,000 after rebounding 178,000 in March, a Reuters survey of economists shows.

Local government elections across Britain are also in the frame. Poor results for the ruling Labour Party are expected and if that puts Prime Minister Keir Starmer's leadership in doubt, investors worry that the gilt market could be under pressure.

"Gilts are already under scrutiny due to inflation risks, and adding political uncertainty to the mix could further push (global) investors to look elsewhere," said ING analysts.

A U.S. trade court ruled Trump's latest 10% temporary global duties are unjustified under a 1970s trade law. But analysts expect a swift appeal and little overall impact to U.S. levies.

Treasury yields had tracked crude prices higher through Thursday as traders worried about inflation, but did not move much more on Friday with the benchmark 10-year yield US10YT=RR at 4.39%.

Australian 10-year yields AU10YT=RR jumped six basis points to 4.99%. Bitcoin BTC= was drifting towards a sixth weekly gain in a row at $79,680.