EMERGING MARKETS-Stocks, FX retreat on US-Iran fighting but eye weekly gains

* MSCI EM stocks set for biggest weekly jump in a month

* South ​Korean stocks mark ⁠best week since 2008

* DBRS to review Romania's rating, ​days after government toppled

May 8 (Reuters) - Emerging market stocks and currencies lost ground on Thursday after renewed fighting between the U.S. and Iran in the Middle East ​sent ‌oil prices higher and weighed on risk appetite.

U.S. and Iranian forces clashed in the Gulf, endangering a month-old ceasefire and shaking hopes for a diplomatic ⁠solution to the crisis.

"Markets have slipped back thanks to questions about whether the ceasefire ⁠is holding. However, they still aren't pricing in the ​worst-case scenario, as Trump told ABC News that 'the ceasefire is... It's in effect'," analysts at Deutsche Bank said in a note.

MSCI's index tracking global EM currencies slipped 0.2%, while the stocks gauge fell 0.7%, retreating from record highs.

Both indexes are set for their biggest weekly gains in ​a month, as comments ‌from officials signalling the U.S. and Iran were close to an agreement and that the war could end swiftly had boosted risk appetite this week.

The dollar index was slightly lower on Friday. Investors will be watching the crucial U.S. nonfarm payrolls report to assess the path of monetary policy, which could set the tone for markets heading into the weekend.

South Africa's rand strengthened 0.6% against the dollar, while ​Turkey's lira was little changed. Most currencies in emerging Europe were subdued against the euro.

Most stock bourses across emerging markets eased. South Korea's ‌Kospi index closed lower on the day but marked its sharpest weekly jump since 2008, while the main gauge in Taiwan fell 0.8%.

"The (Korean) index is heavily dominated by two tech names and ‌as long as the tech cycle momentum holds, the index can trade irrespective of the broader economy," said Mohit Kumar, an economist at Jefferies, on why reliance on Middle East energy was not affecting Korean stocks.

Stock indexes in Poland and Hungary lost 1.6% each. Romanian equities ​advanced 0.8%, on track for their steepest weekly rise since mid-February.

Romania entered a phase of uncertainty after Prime Minister Ilie Bolojan's government was toppled this week ‌in a no-confidence vote and its leu currency hit a record low against the euro.

The move could result in political deadlock, potentially delaying measures to narrow the country's budget deficit, the biggest in the European Union, and putting EU funds and the country's credit ratings at risk.

DBRS is ⁠scheduled to review ⁠Romania's rating later in the day.

Turkish stocks were flat and hovering around record highs, while ‌South African equities tumbled 1.3% despite rising gold prices.

S&P Global will review its ratings on Poland and Israel later in the day.

Markets in the Czech Republic were closed ​for a public holiday.

Meanwhile, EM bonds are ​benefiting from renewed optimism, with sovereign and corporate spreads narrowing to their tightest since the financial ‌crisis, LSEG data showed.

HIGHLIGHTS:

** Hungary's April inflation rises to 2.1%, slightly above forecast

** Japan bets on Washington, BOJ for extra punch in yen battle

** Iran price shock highlights limits of inflation-linked bonds

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Purvi Agarwal in Bengaluru; Editing by Emelia Sithole-Matarise)