Upbeat U.S. economic news helped lift Asian stock markets on Thursday, while crude oil prices fell in choppy trade on reports of a possible peace deal for Libya.

U.S. stock index futures were also firmer, suggesting a positive start for Wall Street.

Markets kept a wary eye on developments in Libya as the struggle between Muammar Gaddafi's loyalists and rebels who have taken swathes of Libya intensified, but one report said Gaddafi and the president of the Arab League had agreed to a peace plan from Venezuela's President Hugo Chavez.

The worry was that growing instability in key Middle East oil producing countries could signal another threat to global supplies. Bank of America Merrill Lynch analysts argue the oil shock from Libya ranks as the eighth largest supply shock since 1950.

The stability of the region has gone through a major shock and the ripples are going to be felt for a while, said Carl Larry, president of Oil Outlooks and Opinions based in Houston.

Gold, often sought in times of heightened geopolitical tensions and as an inflation hedge, slipped to around $1,424 an ounce, down from a record high just above $1,440.

Tokyo's Nikkei average <.N225> closed 0.9 percent higher, a day after it suffered its biggest fall this year, while stocks elsewhere in Asia <.MIAPJ0000PUS> gained 1.1 percent.

It's too early to be optimistic because concerns about rising oil prices will likely persist, Masumi Yamamoto, a market analyst at Daiwa Securities Capital Markets, cautioned.

But investors might have oversold yesterday, so they may buy back stocks with good fundamentals.

South Korea's KOSPI <.KS11>, which plumbed a three-month low on Wednesday, was among the best performers in the region, advancing 2.2 percent on the day.

Hong Kong's Hang Seng index <.HSI> gained 1.0 percent, while China's Shanghai Composite Index <.SSEC> was steady.

U.S. crude fell 1.2 percent to $101.06 a barrel, reversing earlier gains, but was still not far from the recent peak at $103.41. Brent crude shed 1.4 percent to $114.71, pulling away from the February 24 high near $120.

Wall Street eked out small gains on Wednesday with the S&P 500 index <.SPX> ending 0.2 percent higher after the Federal Reserve's Beige Book suggested economic activity picked up in 2011 and a private survey pointed to strong private-sector hiring.

The private-sector jobs report bodes well for the influential non-farm payrolls data due on Friday.

EURO PINS HOPES ON ECB

In the currency market, the euro held its ground against the dollar after rallying to near four-month highs against the dollar. The single currency is expected to stay supported ahead of the European Central Bank policy meeting.

Markets expect the ECB to sharpen its anti-inflation rhetoric, reinforcing views the ECB will raise interest rates before the U.S. Federal Reserve.

The euro last traded at $1.3866, having climbed as high as $1.3890. The dollar index <.DXY>, which tracks its performance against a basket of major currencies, was little changed on the day at 76.680, hovering near the overnight low of 76.529, its lowest since early November 2010.

Still, some analysts warn the rally in the euro will probably fizzle after the meeting.

There has been a lot of hype in the market on the ECB for some time, so I expect the euro to lose steam pretty much regardless of what the ECB does today, said Teppei Ino, currency analyst at the Bank of Tokyo-Mitsubishi UFJ.

(Additional reporting by Luke Pachymuthu in Singapore and Ayai Tomisawa and Hideyuki Sano in Tokyo; Editing by Tomasz Janowski)