Portugal Colonial - Seoul leads Asian stocks higher as US inflation eases rate fears

The mood was also lifted by strong Wall Street earnings, while US President Donald Trump's U-turn on threats to impose levies on cargo through the Strait of Hormuz provided a little support.

Still, oil prices extended their rally Wednesday as American forces again hit Iranian sites and the US president reimposed a naval blockade of ships sailing to and from the country's ports.

Crude is up more than 10 percent since the two countries hostilities flared up last week.

Figures on Tuesday showed US consumer prices rose 3.5 percent last month, down from May's three-year high of 4.2 percent and the sharpest pullback in six years.

The reading was also well short of the 3.8 percent expected, thanks to a drop in energy costs caused by the US-Iran truce that led to the reopening of the Strait of Hormuz.

Investors breathed a sigh of relief at the data and pared their bets on a Fed rate hike this month, though analysts warned the latest US-Iran flare-up could complicate matters.

"The softer inflation data is likely to be welcomed by Federal Reserve officials, reducing the immediate pressure for further rate hikes," wrote Fiona Cincotta at City Index.

"However, the recent rebound in oil prices and renewed US-Iran tensions could yet complicate the inflation outlook if higher energy costs persist."

And SPI Asset Management's Stephen Innes added that the "Fed can keep the gun on the table without firing it".

"Markets still price at least one hike this year, with some chance of a second, so the tightening story has not disappeared. (The consumer price index data) simply removed the tripwire sitting directly in front of July," he said.

Asian stocks enjoyed a much-needed rally following a painful selloff in recent weeks as tech firms were battered by concerns over extended valuations and the vast sums invested in artificial intelligence.

Seoul, which has borne the brunt of the losses, jumped as much as seven percent at one point.

That came on the back of a 10 percent rally in chip giant SK hynix, which has collapsed around 30 percent since hitting a record high last month.

There were also gains in Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Taipei and Manila.

The dollar extended losses against its peers owing to the lower expectations for a US rate hike.

That followed a healthy day on Wall Street, where tech firms were back on the rise after the inflation figures.

Also lifting sentiment were banking giants JP Morgan, Citigroup, Bank of America, Goldman Sachs and Wells Fargo all reporting higher profits in the unofficial kickoff to second-quarter earnings season.

However, IBM collapsed more than 25 percent after releasing disappointing preliminary second-quarter results, blaming a shift in spending by customers caused by expected higher prices for memory chips and other AI-related infrastructure.

And while expectations for a rate hike this month have receded, Fed boss Kevin Warsh warned Tuesday that it was still too early to celebrate.

"There might be some that look at this morning's data and say, 'Oh, mission accomplished! Everything is swell'," he said at a House Financial Services Committee hearing. "That is not my view."

He told lawmakers that Federal Reserve officials have "no tolerance" for stubbornly high prices and vowed to rid the United States of a years-long "inflation surge."

He added: "What I'd say is there's plenty of work to do."

- Key figures around 0200 GMT -

West Texas Intermediate: UP 0.9 percent at $80.04 a barrel

Brent North Sea Crude: UP 1.1 percent at $85.68 a barrel

Tokyo - Nikkei 225: UP 0.9 percent at 68,363.59

Seoul - Kospi: UP 6.7 percent at 7,318.27

Hong Kong - Hang Seng Index: UP 1.3 percent at 24,667.27

Shanghai - Composite: UP 0.2 percent at 3,976.41

Euro/dollar: UP at $1.1435 from $1.1423 on Tuesday

Pound/dollar: UP at $1.3401 from $1.3386

Dollar/yen: DOWN at 162.09 yen from 162.18 yen

Euro/pound: DOWN at 85.32 pence from 85.33 pence

New York - Dow: FLAT at 52,508.27 (close)

London - FTSE 100: UP 0.3 percent at 10,529.39 (close)

A.Motta--PC