Sawt Falasteen - Stocks extend gains and oil dips as US, Israel, Iran continue strikes

While the war in the Middle East shows no sign of ending and oil has stuck around $100 a barrel -- threatening to fuel a fresh inflation spike -- equity traders have shifted back into the market after the steep losses suffered at the outset of the conflict.

However, analysts warned the positive mood could fade if the crisis drags on and energy costs spiral with Hormuz -- through which a fifth of global oil and gas flow -- effectively closed by Iran as an economic weapon.

That comes with central banks increasingly in a bind as the need for lower interest rates to support the economy goes up against the prospect of rising prices, which would need higher borrowing costs.

In a bid to ease traffic through the crucial Strait, US forces dropped several 5,000-pound (2,250 kg) bombs on "hardened Iranian missile sites" near the coast, Central Command said.

Iran has sought to extract a heavy toll on the global economy in retaliation for the US-Israeli attack, including by driving up the cost of oil.

US President Donald Trump on Tuesday fumed that allies, which have largely distanced themselves from his war, were not lining up to help escort tankers through Hormuz.

The attacks came as Israel announced it had killed security chief Ali Larijani, a key force leading Iran since the death of Supreme Leader Ayatollah Ali Khamenei in the first strikes of the war.

Meanwhile, Saudi Arabia intercepted six drones and Kuwait's air defences responded to a rocket and drone attack, authorities from both countries said Wednesday, while two people were killed by missiles near Tel Aviv.

Israel also hit a central Beirut neighbourhood as it looks to take out the Iran-backed Hezbollah.

Rystad Energy estimated just 12.5 million barrels per day of Middle Eastern oil remains online, down from the 21 million per day pre-war base.

"But the 12.5 million bpd figure is not secure," Rystad said. "If the (Hormuz) situation persists, the drop in departures could start feeding through into additional export losses in the weeks ahead, as producers face growing difficulty moving crude out of the Gulf."

Still, oil prices fell, with West Texas Intermediate losing more than one percent to sit around $95, while Brent dipped 0.8 percent, though it was still holding above $102.

And stocks continued to defy gravity following gains on Wall Street that were helped by tech giants including Apple and Amazon.

Seoul jumped more than three percent thanks to a surge in chip giants Samsung and SK hynix. The Kospi, however, is still well down from the record highs touched before the war broke out.

Tokyo was up more than two percent, while Taipei, Sydney, Singapore and Wellington also rallied. Hong Kong and Shanghai dipped.

"Asia is picking up the baton with a cautiously constructive tone... all of it leaning on the signal from Wall Street where the S&P and Nasdaq have now strung together a second day of gains, suggesting the market is actively choosing to look through the geopolitical noise rather than price it in the fore," wrote SPI Asset Management's Stephen Innes.

However, Fawad Razaqzada at Forex.com warned that traders might begin to rethink their positions the longer the conflict rumbles on.

"If the war continues then the US and Israel will have to continue alone, because other NATO members have decided against joining the conflict," he wrote.

"This may work in favour of Iran keeping the Strait of Hormuz closed for longer."

Focus is also on the Federal Reserve's policy meeting that concludes later Wednesday.

The bank is expected to keep borrowing costs on hold but it will release its "dot plot" forecast for rates in the coming months, amid speculation it could be forced to hike again.

- Key figures at around 0230 GMT -

Brent North Sea Crude: DOWN 0.7 percent at $102.66 per barrel

West Texas Intermediate: DOWN 1.2 percent at $95.03 per barrel

Tokyo - Nikkei 225: UP 2.2 percent at 54,898.44 (break)

Hong Kong - Hang Seng Index: DOWN 0.2 percent at 25,829.00

Shanghai - Composite: DOWN 0.2 percent at 4,041.19

Euro/dollar: DOWN at $1.1533 from $1.1536 on Tuesday

Pound/dollar: DOWN at $1.3351 from $1.3352

Dollar/yen: DOWN at 159.00 yen from 159.05 yen

Euro/pound: UP at 86.39 pence from 86.38 pence

New York - Dow: UP 0.1 percent at 46,993.26 (close)

London - FTSE 100: UP 0.8 percent at 10,403.60 (close)

U.Shaheen--SF-PST