By Purvi Agarwal

May 7 (Reuters) - Emerging market stocks and currencies gained on Thursday on indications a peace deal between Iran and the United States could be reached soon, while persistent euphoria around artificial intelligence further added to market gains.

Brent crude futures LCOc1 fell more than $3 to $98 a barrel, a level below the $100-mark that is seen as critical for the health of the global economy.

On Wednesday, U.S. President Donald Trump predicted a swift end to the war as Tehran considered a U.S. peace proposal.

Markets heaved a sigh of relief on the signs of progress, with MSCI's gauge tracking EM currencies .MIEM00000CUS up 0.3%, while the stocks gauge .MSCIEF rose 1.6% to a record high.

"The risk‑on trade driven by Gulf de‑escalation triggered sizeable rallies in EM currencies... today, FX is showing signs of stabilisation, but higher equities continue pointing to optimism around further de‑escalation," said Francesco Pesole, FX strategist at ING.

"Volatility in FX should remain elevated as markets await the final word on a US‑Iran deal."

Most EM currencies strengthened against a slightly weaker dollar. China's yuan appreciated to its highest level in more than three years.

Turkey's lira TRYTOM-D3 was subdued against the dollar, while South Africa's rand ZAR= advanced 0.6%, tracking gains in gold prices, a top export of the country.

Most currencies in emerging Europe were subdued against the euro. Romania's leu EURRON= traded flat after shedding over 3% in the last five sessions.

A no-confidence vote toppled Prime Minister Ilie Bolojan's government, with policy deadlock expected ahead. That could delay reforms needed to unlock funds from the European Union and put the country's credit ratings at risk.

In the midst of mixed performance across emerging market regions, Israeli assets have quietly outperformed. The shekel ILS= was trading at its highest level against the dollar since 1993, while Israeli stocks .TA125 have been trading at record highs.

Israel's 5-year credit default swap fell to 63 basis points, a level last sustained before the October 2023 Hamas attacks.

Tech-heavy stock bourses in South Korea .KS11 and Taiwan .TWII continued to enjoy the AI boost, each closing over 1% higher. Korea's Kospi breached 7,000 points for the first time on Wednesday in an eye-popping rally.

Bourses in Europe, on the other hand, took a breather, with stocks slipping 0.8% in Poland .WIG20 and 0.3% in Hungary .BUX. Romanian equities .BETI jumped 2.2%, driven by a 6.7% jump in Premier Energy.

South African stocks .JTOPI gained 0.4%, while equities in Turkey .XU100 were up 0.1%.

HIGHLIGHTS:

** Thai central bank chief revises GDP growth forecast up to 2.1% for this year

** Malaysia holds key rate steady, but warns of uncertainties from Middle East conflict

** Indonesia targeting 2027 GDP growth in 5.9% to 7.5% range, minister says

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