Brent futures prices are edging higher today after a U.S. Navy ship destroyed an Iranian drone in the Strait of Hormuz.
Iran said all its drones had returned safely to base, and there was no sign of a major escalation in the Gulf.
In early European trade, pan-region Euro Stoxx 50 futures were up 0.63%, German DAX futures rose 0.63% and Britain's FTSE futures gained 0.46%.
Stocks had rallied late on Thursday after two influential Federal Reserve officials - New York Fed President John Williams and Fed Board of Governors Vice Chair Richard Clarida - laid out the case for quick action by the central bank to support the USA economy.
Investors took Williams' remarks along with separate comments from Fed Vice Chair Richard Clarida as another dovish signal from the central bank, which could be opening the way for a big rate cut at the end of this month. The odds eased to around 40 per cent after the New York Fed clarified that Williams' speech was not about immediate policy direction.
Elsewhere in Asia, the Shanghai Composite Index rose 0.8 per cent, Australian stocks added 0.75 per cent and South Korea's KOSPI gained 1.4 per cent.
The index was up only 0.3 percent on the week, as riskier assets were partly capped by US President Donald Trump's reiteration of his threat to impose further duties on Chinese imports. It was, however, still on track to break a six-week streak of weekly gains. The two sides resumed talks recently to try and end a year-long trade war that has rattled financial markets and slowed global growth. "China trade tensions", said Han Tan, market analyst at FXTM.
The Fed voted in December to raise the benchmark federal fund rate to a range between 2.25 percent and 2.50 percent, the fourth time it did so in 2018. Among other big gainers against the dollar, the pound was up 0.98% at $1.2552 after hitting a 27-month low of $1.2382 the previous day.
Mendon Capital Advisors Senior Portfolio Manager Anton Schutz on M&A in the financial sector and the impact of Federal Reserve policy on banks and the US dollar. The 10-year yield declined to a 10-day trough of 2.023 percent and was last at 2.045 percent.
US crude fell 0.09% to $55.25 per barrel and Brent was last at $62.13, up 0.32% on the day.
Spot gold extended the previous day's rally made on the prospects of lower U.S. interest rates and brushed a six-year high of Dollars 1,452.60 an ounce, before pulling back a touch to USD 1,442.25.
The alleged incident yesterday comes amid soaring tensions between the two foes after Iran shot down a United States drone last month.
The dollar's weakness and expectations of a dovish shift in the rate cycle have boosted many emerging market currencies.