HONG KONG: Asian equities rallied Thursday following a strong bounce on Wall Street and a breathtaking surge in Europe sparked by a plunge in oil prices and bargain-buying following a Ukraine-fuelled rout.

A glimmer of hope for peace talks provided some much-needed support to asset markets, which have been in the grip of extreme volatility in the two weeks since Russia invaded its neighbour, sparking a wave of sanctions against Moscow.

However, commentators urged caution in a time of massive uncertainty, with some warning that further losses for stocks were likely and crude will no doubt remain elevated for some time.

But for now, investors are enjoying a rare moment of calm, lapping up cheaper equities after a blockbuster day for their US and European colleagues.

The Dow jumped two percent, the S&P 500 even more and the tech-heavy Nasdaq an impressive 3.6 percent.

Frankfurt rocketed nearly eight percent and Paris more than seven percent, with analysts also crediting the gains to talk of a plan to issue more joint debt to fast-track green energy and renewables, defence and subsidies for spiking energy costs.

But a key driver of the advance was a massive drop in oil prices, which provided some relief to traders worried about already high inflation being sent even higher.

Brent at one point dropped to as low as $105.60, having hit a peak of $139 two days before, on hopes that the huge amounts of Russian oil taken out of the market by sanctions could be largely replaced by sourcing from elsewhere.

The United Arab Emirates said Wednesday it would urge fellow states in the OPEC oil producers’ cartel to boost output, while US talks with massive producer Venezuela appeared to be making progress.

At the same time Iraq has said it could lift output and nuclear talks with Iran were also showing signs of bearing fruit.

Both main contracts were down in Asian trade Thursday but with the war in Ukraine still raging and supplies still tight, expectations are for the commodity to maintain its strength.

Meanwhile, the optimists were given a lift after a top foreign policy aide to Ukraine President Volodymyr Zelenskiy said the country was prepared to talk about Moscow’s demand for it to remain neutral in return for security guarantees.

“Surely, we are ready for a diplomatic solution,” deputy chief of staff Ihor Zhovkva told Bloomberg Television.

“Our first and foremost pre-condition for having such kind of negotiations is immediate cease-fire and withdrawal of Russian troops.”

That came as Russia’s foreign ministry said it would be better if its goals in Ukraine were achieved through talks.

Investors will be keeping a close eye on a meeting between the countries’ foreign ministers in Turkey on Thursday, marking the first high-level contact between Kyiv and Moscow since the invasion.

“If you see a resolution of the war in Ukraine – and we are getting some reports that Russia and Ukraine might be moving closer to the negotiation stage – that could help shift sentiment,” said Nadia Lovell of UBS Global Wealth Management.

But she said she saw further choppiness ahead.

On equity markets, Tokyo bolted 3.8 percent higher, while Hong Kong, Seoul and Taipei climbed more than two percent each. Shanghai, Sydney, Singapore, Manila and Wellington were also sharply up.

However, markets remain well down on the year and Stephen Innes at SPI Asset Management said: “It has been a harrowing week for investors; keep in mind these are financial-crises-type markets where everybody is trading headlines and chasing the same momentum intraday.

“But this should prove to be a reminder that systematic flow can move markets both ways, especially when the active investor base sits on the sidelines.”

Key figures around 0300 GMT

Tokyo - Nikkei 225: UP 3.8 percent at 25,667.85 (break)

Hong Kong - Hang Seng Index: UP 2.1 percent at 21,053.66

Shanghai - Composite: UP 1.8 percent at 3,314.87

Brent North Sea crude: DOWN 0.6 percent at $110.47 per barrel

West Texas Intermediate: DOWN 1.1 percent at $107.52

Euro/dollar: DOWN at $1.1054 from $1.1067 late Wednesday

Pound/dollar: DOWN at $1.3161 from $1.3181

Euro/pound: UP at 84.00 pence from 83.94 pence

Dollar/yen: UP at 116.05 yen from 115.86 yen

New York - Dow: UP 2.0 percent at 33,286.25 (close)

London - FTSE 100: UP 3.3 percent at 7,190.72 (close)