SYDNEY (Reuters) -Share markets in Asia struggled for direction on Friday as fears of a potential U.S. attack on Iran hung over markets, while oil prices were poised to rise for a third straight week on the escalating Israel-Iran conflict.

Overnight, Israel bombed nuclear targets in Iran, and Iran fired missiles and drones at Israel as a week-old air war intensified with no sign yet of an exit strategy from either side.

The White House said President Donald Trump will decide in the next two weeks whether the U.S. will get involved in the Israel-Iran war. The U.S. President is facing uproar from some of his MAGA base over a possible strike on Iran.

Brent fell 2% on Friday to $77.22 per barrel, but is still headed for a strong weekly gain of 4%, following a 12% surge the previous week.

"The 'two-week deadline' is a tactic Trump has used in other key decisions, including those involving Russia and Ukraine, and tariffs," said Tony Sycamore, analyst at IG.

"Often, these deadlines expire without concrete action, (similar to TACO), and there is certainly a risk of this happening again, given the complexities of the situation."

Still, a cautious mood prevailed in markets with Nasdaq futures and S&P 500 futures both 0.3% lower in Asia. U.S. markets were closed for the Juneteenth holiday, offering little direction for Asia.

The MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1% but was set for a weekly drop of 1%. Japan's Nikkei slipped 0.2%.

China's blue chips rose 0.3%, while Hong Kong's Hang Seng gained 0.5%, after the central bank held the benchmark lending rates steady as widely expected.

In the currency markets, the dollar was on the back foot again, slipping 0.2% to 145.17 yen after data showed Japan's core inflation hit a two-year high in May, which kept pressure on the Bank of Japan to resume interest rate hikes.

Investors, however, see little prospects of a rate hike from the BOJ until December this year, which is a little over 50% priced in.

The U.S. bond market, which was also closed on Thursday, started trading in Asian hours on a subdued note. Ten-year Treasury bond yield was flat at 4.389%, while two-year yields slipped 2 basis points to 3.925%.

Overnight, the Swiss National Bank cut rates to zero and did not rule out going negative, while the Bank of England held policy steady but saw the need for further easing and Norway's central bank surprised everyone and cut rates for the first time since 2020.

Gold prices eased 0.2% to $3,363 an ounce, but were set for a weekly loss of 2%.