Asian stocks rose on Thursday, with energy shares leading the way as crude oil prices bolted higher after U.S. President Donald Trump`s decision to pull out of a nuclear deal with Iran.

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MSCI`s broadest index of Asia-Pacific shares outside Japan added 0.2 percent, while Japan`s Nikkei climbed 0.5 percent.

Elsewhere in Asia, a stunning election upset in Malaysia by the opposition sent ringgit forwards sliding more than 2 percent in offshore trade and the cost to insure against a Malaysian debt default rose.

Moody`s ratings agency said the country was now in uncharted territory after an alliance of opposition parties led by former prime minister Mahathir Mohamad shocked the ruling coalition.

"The surprise win by Mahathir`s coalition party is likely to see an increase in policy uncertainty at least in the short term with market volatility likely to be higher," said Sian Fenner, lead Asian economist at Oxford Economics.

Special public holidays were declared for Thursday and Friday following the elections.

But, highlighting investor worries, the U.S.-traded iShares MSCI Malaysia ETF plunged 6 percent overnight to a one-year low.

Overnight, the Dow gained 0.75 percent and the S&P 500 climbed nearly 1 percent, with the S&P energy index rallying 2 percent.[.N]

Energy shares soared as crude oil prices reached 3-1/2-year highs, with investors betting the U.S. withdrawal from a nuclear agreement with Iran would increase tensions in the Middle East and curtail oil supply.

Rising oil prices in turn pushed up U.S. Treasury yields by fanning inflation concerns. The 10-year Treasury note yield rose to a two-week high above the 3 percent threshold before pulling back a little to 2.996 percent us10yt

Shored up by higher yields, the dollar climbed to a 4-1/2-month high of 93.416 against a basket of six major currencies overnight . The dollar index was last at 93.130.

The New Zealand dollar retreated to a five-month low of $0.6930 after the Reserve Bank of New Zealand (RBNZ) wrongfooted hawks by keeping interest rates steady and saying the next move might be a cut or a hike.

"The RBNZ surprised markets with a slight dovish shift. It kept the official cash rate (OCR) on hold, as was widely expected, but notably allowed for the OCR to move `up or down`, rather than simply on hold – a slightly dovish development in our view," said Imre Speizer, economist at Westpac.

The euro crawled back to $1.1849 jpy

In commodities, U.S. crude futures clc1

Oil prices rose about 3 percent on Wednesday.[O/R]

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)