SYDNEY (Reuters) -Asian shares edged up on Friday on relief that fears of an imminent U.S. attack on Iran appeared to have been forestalled for now, weighing on the dollar and Brent oil prices.

Overnight, Israel bombed nuclear targets in Iran, and Iran fired missiles and drones at Israel as a week-old 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 president is facing uproar from some of his MAGA base over a possible strike on Iran which some fear could drag the U.S. into another long war.

Brent fell 2.1% on Friday to $77.23 per barrel, but is still headed for a weekly gain of 4%, following an almost 12% surge the previous week.

Lower oil prices appear to have given European stocks some reason to cheer, with EUROSTOXX 50 futures up 0.8% and FTSE futures up 0.3%.

"Yesterday the message from Trump was that he was considering strikes on Iran within days. Overnight comments from White House ... now suggest the decision is going to be within weeks," said Rodrigo Catril, senior FX strategist at the National Australia Bank.

"While the news that U.S. administration is not considering an imminent strike should be considered as positive, opening the door for negotiation, price action would suggest investors remain very nervous."

Indeed, both Nasdaq futures and S&P 500 futures were 0.2% 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 gained 0.7% driven by a 1.2% jump in Hong Kong's Hang Seng. It is still down 0.4% for the week.

South Korea's share benchmark also outperformed with a jump of 1.1%, topping the 3,000 level for the first time since early 2022, after newly elected President Lee Jae Myung announced a stimulus spending plan.

Japan's Nikkei was flat.

China's central bank on Friday held the benchmark lending rates steady as widely expected, while data from Japan showed core inflation hit a two-year high in May, keeping 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.

In the currency markets, the dollar was on the back foot again against its major peers, but is set for a weekly gain of 0.5%. [FRX/]

The euro gained 0.3% to $1.1527, while the pound rose 0.2% to $1.3494.

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 4.3909%, while two-year yields slipped 1 basis points to 3.9289%, from the close on Wednesday.

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 0.5% to $3,354 an ounce, but were set for a weekly loss of 2.3%.