Oct 4 (Reuters) - A look at the day ahead in Asian

markets.

What comes down must go up.

And so it is with oil, whose rise on escalating fears over a

deepening conflict in the Middle East is casting an increasingly

dark shadow over world markets as the week draws to a close.

Brent crude leaped more than 5% on Thursday for its biggest

rise in a year, bringing the week-to-date gains to more than 8%.

If oil holds steady on Friday, it will clock its biggest weekly

rise since January last year.

It's true that oil's rebound is coming from a low base and

prices are back to where they were only a month ago, but world

stocks and investors' risk appetite are beginning to feel the

heat.

The oil price is still around 10% lower than it was a year ago

and has been negative on a year-on-year basis since July, a

dynamic that has highlighted the mounting disinflationary

pressures around the world.

But it was down nearly 30% year-on-year only a few weeks

ago. If geopolitical tensions persist and oil continues to rise,

investors may need to rethink their inflation outlooks.

U.S. Treasury yields are rising and the yield curve is

steepening, led by the long end, which suggests longer-term

inflation worries may be creeping into investors' minds.

For Asia, the tailwinds from China's stimulus bonanza last week

appear to be fading in the face of growing headwinds from oil

and risk aversion.

Another notable consequence of escalating geopolitical tensions

is the burst of safe-haven demand for the U.S. dollar. The

dollar index on Thursday hit a six-week high, and is on track

for its biggest weekly rise since April.

Put the two together - higher Treasury yields and a stronger

dollar - and it's not a particularly attractive backdrop for

Asian markets. Especially on a Friday, a day after the MSCI Asia

ex-Japan index hit its highest level since January 2022.

The Asian economic calendar on Friday is fairly light, with

consumer inflation from the Philippines, retail sales data from

Singapore, services purchasing managers index and manufacturing

PMI reports from India and Hong Kong, respectively, as the main

releases.

Global events are likely to set the market tone on Friday.

Investors in Asia may also be of a mind to play it safe

ahead of the U.S. non-farm payrolls report for September out of

Washington on Friday morning. This and the October data will go

a long way to determining the size of the expected interest rate

cut in early November.

Rates futures market pricing is currently evenly split over

a 25 or 50 basis point cut.

Here are key developments that could provide more direction

to Asian markets on Friday:

- Philippines inflation (September)

- India services PMI (September)

- Singapore retail sales (August)