TOKYO (Reuters) - Asian stocks rose on Thursday, with energy shares leading the way as crude oil prices bolted higher after U.S. President Donald Trump’s decision to pull out of a nuclear deal with Iran.

An employee of the Tokyo Stock Exchange (TSE) works at the bourse in Tokyo, Japan, February 6, 2018. REUTERS/Toru Hanai

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.2 percent, while Japan’s Nikkei climbed 0.5 percent.

Elsewhere in Asia, a stunning election upset in Malaysia by the opposition sent ringgit forwards sliding more than 2 percent in offshore trade and the cost to insure against a Malaysian debt default rose.

Moody’s ratings agency said the country was now in uncharted territory after an alliance of opposition parties led by former prime minister Mahathir Mohamad shocked the ruling coalition.

“The surprise win by Mahathir’s coalition party is likely to see an increase in policy uncertainty at least in the short term with market volatility likely to be higher,” said Sian Fenner, lead Asian economist at Oxford Economics.

Special public holidays were declared for Thursday and Friday following the elections.

But, highlighting investor worries, the U.S.-traded iShares MSCI Malaysia ETF plunged 6 percent overnight to a one-year low.

Overnight, the Dow gained 0.75 percent and the S&P 500 climbed nearly 1 percent, with the S&P energy index rallying 2 percent.[.N]

Energy shares soared as crude oil prices reached 3-1/2-year highs, with investors betting the U.S. withdrawal from a nuclear agreement with Iran would increase tensions in the Middle East and curtail oil supply.

Rising oil prices in turn pushed up U.S. Treasury yields by fanning inflation concerns. The 10-year Treasury note yield rose to a two-week high above the 3 percent threshold before pulling back a little

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