(Updates to Asia afternoon)

* Equities catch breath on Friday after recouping March

losses

* Dollar near six-week lows as demand for safe havens

fades

* US, Iran may meet at weekend; Strait of Hormuz remains

closed

By Ankur Banerjee

SINGAPORE, April 17 (Reuters) - Asian stocks headed for

a second week of strong gains on Friday while oil prices were

pinned below $100 a barrel with investors dialling back risk

ahead of a crucial weekend that could pave the way for a

near-term resolution to the Middle East war.

A 10-day ceasefire between Lebanon and Israel went into

effect on Thursday and President Donald Trump said the next

meeting between the U.S. and Iran may take place over the

weekend, when their current ceasefire is due to expire.

Investors have been quick to take an optimistic view on any

signs of denouement this month, even though the Strait of Hormuz

- through which a fifth of the world's oil and gas supply

typically flows - remains largely closed.

That optimism has kept oil prices below $100 per barrel

though they remain well above the pre-war levels. Brent crude

futures dropped more than 1% to $98.14 a barrel. U.S.

West Texas Intermediate crude futures fell 1.4% to $93.37

a barrel.

In stocks, MSCI's broadest index of Asia-Pacific shares outside

Japan was down 0.83% as investors locked in

profits after a blistering rally this month.

The index remains close to its highest since March 2, the

first trading day after the Iran war broke out, and is up 14% in

April after dropping 13.5% last month. Almost all stock markets

are back to levels before the war erupted at the end of

February.

U.S. futures were flat in Asian hours while European

futures pointed to a subdued open.

For Andrew Chorlton, CIO for public fixed income at M&G, the

last two weeks have been surprising in how quickly markets have

been willing to look through the conflict and energy shock.

"There's quite a strong contrast between what policymakers

and central bankers are saying about the risks that this

(conflict) is creating versus what the market is implying," he

said.

"That seems somewhat complacent," Chorlton added. "It seems

unlikely that there shouldn't be some additional risk premium

priced in, either to growth or to inflation."

The U.S. dollar benefited from safe-haven flows in March, but

has since given up those gains. The euro last bought

$1.1782, just below the seven-week high it touched in the

previous session.

The U.S. benchmark S&P 500 and the tech-heavy Nasdaq

rose modestly to record closing highs for a second

straight day on Thursday.

"I think equity markets are remaining positive and some

solid U.S. earnings have helped, but - and it's a big but - we

need to see some concrete evidence that peace is going to last,"

said Nick Twidale, chief market strategist at ATFX Global.

"And to me, that is a full reopening of the Strait, or we

could see some substantial corrections in global stocks in the

coming days and weeks."

Closure of the waterway has caused the worst oil price shock in

history, and spurred the International Monetary Fund to

downgrade its outlook for the global economy, warning that a

prolonged conflict could push the world to the brink of

recession.

The war has also clouded the outlook for European firms from

airlines to retailers, despite hopes for robust first-quarter

earnings. Higher energy prices, supply-chain disruption and

slower growth are already feeding into gloomy forecasts.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

was at 98.24, loitering near its lowest since March 2. The index

had declined for eight straight sessions through Wednesday.

The risk-sensitive Australian dollar fetched $0.7167,

drifting near the four-year high it touched on Thursday.

The yen was slightly weaker at 159.48 per dollar as

investors took stock of comments from Bank of Japan Governor

Kazuo Ueda, who steered clear of signalling a rate hike was on

the cards this month.

The remarks will keep traders guessing on the timing of the

next rate hike, with the lack of a clear signal leading markets

to reduce bets of a rate increase at the BOJ's April 27-28

policy meeting.