Asia markets opened higher on Thursday, led by advances in the energy sector, after overnight gains in oil prices pushed US stocks higher.

In Japan, the Nikkei 225 traded up 0.75 percent, while across the Korean Strait, the Kospi was higher by 0.34 percent. Down Under, the S&P/ASX 200 gave up most of its nearly 0.4 percent gains to trade flat.

Oil prices gained in the US session after US government data showed a larger-than-expected drop in crude inventories. Reuters reported the U.S. Energy Information Administration said crude inventories fell 4.2 million barrels in the week to May 20. Analysts polled by Reuters expected a drop of 2.5 million barrels in inventory.

Global benchmark Brent futures settled up 2.3 percent at USD 49.74 a barrel, while US crude futures added 1.93 percent to USD 49.56.

In the currency market, the Japanese yen saw renewed strength against the dollar, with the pair trading at 109.82 as of 8:29 a.m. HK/SIN.

But the pair could climb ahead. Short-covering in the pair was one of the greatest risks that the dollar/yen pair faces at the moment, according to Kathy Lien, managing director of foreign exchange strategy at BK Asset Management.

"Even after the recent rally, speculative long yen positions are near record highs," she said in a note late Wednesday.

Japanese exporters mostly shrugged off the fresh yen strength, with Toyota shares up 1.6 percent, Nissan higher by 1.04 percent, and Honda added 0.99 percent.

Usually a stronger yen is a negative for exporters as it reduces their overseas profits when converted to local currency.

Reuters said a poll found that the confidence in Japanese manufacturers fell to a three-year low in May, highlighting the impact of a strong yen on exporters of cars and electronics. The survey tracks the Bank of Japan's quarterly tankan survey and found the service sector's mood also fell in may, reported Reuters.

Meanwhile, the dollar lost ground against a basket of currencies, with the dollar index at 95.31 after touching levels as high as 95.661 in Wednesday's trade, but that's up from levels under 93 at the beginning of the month.

Angus Nicholson, a market analyst at spreadbetter IG, said the pause in the dollar strength was temporary as economic data stateside continued to be positive.

The New Zealand dollar retreated against the greenback, trading at USD 0.6715 as of 8:37 a.m. HK/SIN, down from levels as high as USD 0.6771 Wednesday.

Foreign exchange strategists at the Commonwealth Bank of Australia said in a morning note that the decline in the Kiwi came after "Fonterra's milk price forecast for the 2016-17 season was much lower than expected."

Fonterra shares were down 0.53 percent.

Meanwhile, the two-day G7 Summit 2016 Japan kicks off in Ise-Shima on Thursday.

Major indexes in the US closed higher, with the Dow Jones industrial average up 0.82 percent, the S&P 500 higher by 0.7 percent and the Nasdaq composite adding 0.7 percent.

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First Published:May 26, 2016 7:43 AM IST