Crude oil prices held near 2-1/2 year peaks on Thursday as worries about supply disruption persisted given ongoing unrest in Libya, but upbeat U.S. economic news and a firmer Wall Street helped Asian stocks find a steadier footing.

Both U.S. crude and Brent crude prices edged up as Libyan rebels repulsed a land and air offensive by Muammar Gaddafi's forces and the defiant leader warned foreign powers of another Vietnam if they intervened.

Markets worry the 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, traded at around $1,433 an ounce, within striking distance of a record high just above $1,440.

Tokyo's Nikkei average <.N225> rose 0.5 percent, following a more than 2 percent fall on Wednesday, while stocks elsewhere in Asia <.MIAPJ0000PUS> gained 0.6 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> was among the best performers in the region, advancing 1.6 percent, a day after plumbing a three-month low.

Nomura analysts said they were turning more cautious on Korea, worried the country's policy management could leave the economy with a much higher inflation rate and more catch up to do later. They also cited relative competition from Japanese companies as the won appreciates and oil prices strengthened.

U.S. crude rose 0.2 percent to $102.47 a barrel, not far from the recent peak at $103.41, while Brent crude was also 0.2 percent higher at $116.63, closing in on 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.

In the currency market, the euro was a touch softer after rallying to near four-month highs against the dollar. But the single currency is expected to stay supported ahead of the European Central Bank policy meeting.

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

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.

The euro last traded at $1.3857, 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 76.690, hovering near the overnight low of 76.529, its lowest since early November 2010.

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

Libya