Asian stocks rose on Friday and were on track for their strongest weekly performance in two months after benign U.S. inflation data prompted traders to lower expectations for a Federal Reserve rate hike next month. Japan's Nikkei remained a standout, building on earlier gains as weaker rate-hike expectations, a soft yen and continued optimism around technology and AI-related shares supported sentiment. Markets priced in about a 35% chance of a Fed hike in September, down from 55% a week earlier, helping lift equities and Treasuries. Still, investor risk appetite remained cautious as faltering efforts to end the war in the Middle East and the possibility of renewed oil-price spikes threatened to revive inflation concerns. Brent crude steadied at $87.03 a barrel and was set for a 4% weekly gain after the United States threatened to increase economic pressure on Iran, including extending a naval blockade. The yen traded near 159.40 per dollar, close to the 160 level that traders see as a potential trigger for further intervention from Tokyo, while investors also weighed the chance that the Bank of Japan could raise rates next month.