* SK Hynix ( SKHY ) earnings lifts dour mood after sharp selloff

* Eyes on slate of big tech earnings in test of AI trade

* Dollar stands tall ahead of delicately poised Fed decision

* Oil prices jump on renewed hostilities in Middle East

By Ankur Banerjee

SINGAPORE, July 29 (Reuters) - Asian stocks rebounded on

Wednesday after a brutal selloff a day earlier as anxiety about

valuations, rising competition and AI spending rocked markets

ahead of crucial earnings from big tech firms and a Federal

Reserve policy decision.

Oil prices jumped in early trading after fresh attacks in

the Middle East shattered the relative calm of recent days in

the U.S.-Iran war as investors fret about the impact of

depleting supplies on prices and global rates.

Asian chipmakers have been at the epicentre of this year's

AI-driven rally and, more recently, investor concerns about its

staying power, sparking sharp market swings. But strong earnings

from SK Hynix ( SKHY ) helped calm some of those fears.

South Korea's KOSPI gained over 1% in early trading

after sinking more than 10% to a three-month low on Tuesday.

Shares of SK Hynix ( SKHY ) rose 2% after the chipmaker posted a more

than sixfold increase in quarterly operating profit but missed

lofty expectations.

"The broader backdrop remains one of rotation rather than

outright risk aversion," said Chris Weston, head of research at

Pepperstone.

MSCI's broadest index of Asia-Pacific shares outside Japan

was 0.8% higher after shedding 3.6% on Tuesday

and remains on course for a monthly drop of 6.6%. Japan's Nikkei

gained 1% but is bracing for a 10% drop in July.

Earnings from "Magnificent Seven" members Microsoft ( MSFT )

and Meta later in the day will be a key test of the AI

trade, particularly after Alphabet and Tesla

spooked investors last week with negative cash flow reports.

Nick Twidale, chief market strategist at ATFX Global in

Sydney, expects another tough day for equities in the Asian day

with SK Hynix ( SKHY ) earnings exacerbating the uncertainty, while the

news from the Middle East is also expected to weigh.

"I think the risk of a Fed hike will also concern investors,

so rather than a more usual pre-Fed quieter market, I've got a

feeling it could be a volatile day ahead."

Nasdaq futures were choppy in Asian hours and were

last up 0.5% while European futures pointed to a higher

open.

OIL JUMPS AHEAD OF FED MEETING

Brent futures jumped 3% to $86.80 per barrel while

U.S. West Texas Intermediate (WTI) crude rose over 3% to

$81.95 after U.S. Central Command said Iran had launched

multiple ballistic missiles that were successfully intercepted.

"The latest attack highlights that the two sides remain a

long way from resolving the core dispute of passage through the

Strait of Hormuz that caused the earlier MOU to collapse," said

Tony Sycamore, market analyst at IG.

Iran effectively shut the key waterway to ships other than

its own after the U.S. and Israel launched strikes on February

28. A deal last month between Washington and Tehran partially

reopened it, but the agreement collapsed in early July after

Iran fired on ships using a channel it does not approve.

That has again put inflation pressures in the spotlight

ahead of the Federal Reserve's policy decision due later on

Wednesday. The U.S. central bank is seen as more likely to leave

interest rates steady even as a growing number of its

policymakers fret openly about inflation.

The decision remains unusually hard to call under the

no-guidance regime adopted by the new Fed Chair Kevin Warsh,

with traders pricing in a 33% chance of a hike. The U.S. dollar

was perched near a one-month high ahead of the decision.

"We think the market may once again be underestimating the

extent of the hawkish shift at the Fed, and that the (for now)

moderate increase in energy prices may tip an already finely

balanced meeting in favour of a hike this week," said Frank

Flight, head of macro strategy at Citadel Securities.

"We acknowledge that it is a close call, but we now see a

rate hike at the July meeting," Flight said.