TOKYO: Asian stocks recovered some losses on Monday and bond yields rose as fears of a wider Middle East conflict ebbed, with investors gravitating back towards riskier assets.

Gold and the safe-haven dollar pulled back from near their peaks, and crude oil prices declined as the potential for a major supply disruption waned.

Iran said on Friday that it had no plan to retaliate following an apparent Israeli drone attack within its borders, which in turn followed an unprecedented Iranian missile and drone attack on Israel days before.

MSCI's broadest index of Asia-Pacific shares rose 0.93%, retracing some of the 1.8% drop from Friday, after news of the Israeli strike emerged.

Japan's Nikkei added 0.48%, underperforming the rest of the region due to a high concentration of chip-sector shares, which tracked declines in U.S. peers from Friday.

Australia's benchmark gained 0.96% and South Korea's KOSPI climbed 1.04%.

Hong Kong's Hang Seng jumped 2.26%, while mainland Chinese blue chips edged up 0.12% in their first chance to react to new measures announced on Friday aimed at promoting overseas investment in China's technology sector.

"It seems neither Israel nor Iran want an escalation in the crisis in the Middle East ... and with a subsequent strike from either side not looking like it's coming, investor concerns have eased somewhat," said Kazuo Kamitani, a strategist at Nomura Securities.

However, Kamitani said expectations of later Federal Reserve interest rate cuts and concerns about chip sector earnings will continue to keep investors on their toes.

Mideast tensions also stayed on the market's radar. Two Iraqi security sources told Reuters at least five rockets were launched from Iraq's town of Zummar towards a U.S. military base in northeastern Syria on Sunday.

MSCI's world equities index suffered its worst week since March 2023 last week, dropping 2.85%. Early on Monday, it was up just 0.06%.

U.S. stock futures added 0.26%, following a 0.88% drop for the S&P 500 on Friday.

Bond yields - which climb when prices fall - rose back toward multi-month highs. The 10-year U.S. Treasury yield added as much as 9 basis points to 4.658%, heading back toward the five-month peak of 4.696% reached last week on the view that the Fed would be in no hurry to ease policy amid robust economic data and sticky inflation.

The dollar index, which measures the currency against six major peers, eased 0.07% to 106.03. It was also at a five-month top last week, at 106.51.

Gold slid 0.6% to $2,376.40, retreating from near the all-time peak of $2,431.29 from last week.

Crude oil fell as traders put the focus back on fundamentals.

With a rise in U.S. stockpiles as the backdrop, Brent futures fell 54 cents, or 0.6%, to $86.75 a barrel. The front month U.S. West Texas Intermediate (WTI) crude contract for May, which expires on Monday, fell 12 cents to $83.02 a barrel. The more active June contract dropped 47 cents, or 0.6%, to $81.75 a barrel.

"It looks on the face of it like oil's uptrend may be over, but based on technical levels, until WTI breaks below $80, the uptrend is still in place," said Nomura's Kamitani.

(Reporting by Kevin Buckland; Editing by Jacqueline Wong)