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By Sruthi Narasimha Chari

May 25 (Reuters) - Asian emerging market assets rose on Monday as optimism over a potential deal to resolve the Iran conflict pressured the dollar and oil prices, lifting risk appetite, although uncertainty over the reopening of the Strait of Hormuz limited broader gains.

MSCI's emerging market currencies gauge .MIEM00000CUS rose 0.3%, while its global emerging market equities index .MSCIEF was up 0.6% in Asian trading. Asian emerging market stocks .MIMS00000PUS outperformed, climbing 1.5% to their highest level in six sessions.

The nearly three-month conflict in the Middle East has sent global energy prices sharply higher. Analysts have said that even if a peace agreement is reached, damage to critical infrastructure could keep near-term oil prices elevated and supply chains disrupted.

Elevated oil prices are increasing inflationary pressures in energy-importing Asian economies, raising concerns over slowdown and current account deficits. At the same time, narrowing bond yield spreads have triggered capital outflows, pressuring several regional currencies and prompting intervention from central banks.

"While the longer end of the yield curve has risen, Asian policy rates remain low, especially as inflationary pressures are likely to rise," analysts at Natixis, led by EM Asia Senior Economist Trinh Nguyen, said in a note.

"The Iran war supply shock is turning into an exchange crisis, and EM Asian central banks must contend with the fallout of investors' risk appetite that has widened the wedge between winners and losers."

Investor optimism cooled slightly after U.S. President Donald Trump said on Sunday that he had instructed his team not to rush negotiations with Iran, despite earlier comments suggesting both sides had largely agreed on a framework to reopen the Strait of Hormuz.

"While risk sentiment has picked up, there needs to be a follow-through in terms of a peace deal between the U.S. and Iran, which includes normalising Hormuz transit", said MUFG senior currency analyst Lloyd Chan.

"Ultimately, markets will need to see the Strait of Hormuz reopened for positive sentiment to be sustained."

Across Asia, regional currencies appreciated to levels last seen in mid-May. The Indian rupee INR=IN, Thai baht THB=TH, the Malaysian ringgit MYR=, the Philippine peso PHP= and Singapore's dollar SGD= all gained ground.

In contrast, the Indonesian rupiah IDR= weakened toward historic lows on concerns over capital outflow, governance issues and export controls.

Equities markets also posted strong gains. Indian benchmarks Nifty 50 .NSEI and the BSE Sensex .BSESN rose more than 1% each, Taiwan stocks .TWII advanced more than 3% and Philippine equities climbed over 1%.

Shares in Singapore .STI gained 0.5% to scale a record high of 5,102.07 points, while Jakarta stocks .JKSE rebounded modestly after steep losses over the previous two weeks.

HIGHLIGHTS:

** Yield on Indonesia's 10-year bonds ID10YT=RR AT 6.737%

** Singapore economy beats expectations in Q1 with 6% annual growth

** Thai April exports rise 23.1% on year, beating forecast

Asia stock indexes and currencies at 0446 GMT
COUNTRY	FX RIC	FX DAILY %	FX YTD %	INDEX	STOCKS DAILY %	STOCKS YTD %
Japan	JPY=	+0.21	-1.38	.N225	3.05	25.92
China	CNY=CFXS	+0.24	+3.04	.SSEC	0.57	4.22
India	INR=IN	+0.35	-5.76	.NSEI	0.92	-8.39
Indonesia	IDR=	-0.23	-5.98	.JKSE	0.93	-28.07
Malaysia	MYR=	+0.30	+2.61	.KLSE	-0.13	1.81
Philippines	PHP=	+0.27	-4.27	.PSI	1.25	-0.28
S.Korea	KRW=KFTC	-	-5.15	.KS11	-	86.22
Singapore	SGD=	+0.23	+0.70	.STI	0.44	9.56
Taiwan	TWD=TP	+0.48	+0.07	.TWII	3.14	50.51
Thailand	THB=TH	+0.52	-3.02	.SETI	0.95	23.31