* Energy firms lead world stocks index to three-week high
* Political concerns intensify on Malaysia vote, Italy talks
* BoE policy meeting, U.S. inflation up ahead
* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
By Abhinav Ramnarayan
LONDON, May 10 (Reuters) - World stocks hit a three-week high on Thursday and turned positive for the year as rising oil prices gave energy firms a shot in the arm that countered the effects of increased political uncertainty.
Brent crude rose to another 3-1/2 year high of $77.89 overnight LCOc1 amid fears of supply disruptions after President Donald Trump withdrew the United States from a nuclear accord with Iran and ordered sanctions to be reimposed. dollar meanwhile eased slightly from 2018 highs ahead of U.S. April inflation numbers later on Thursday and as currency markets eyed the Bank of England's policy meeting and inflation report.
"It's difficult to know what the principal drivers are given there's a whole host of events, but it could well be that the effect of oil prices on resources companies is outweighing negatives elsewhere," said Investec economist Philip Shaw.
"But I think the main thing the market is looking out for is whether growth in the global economy has peaked and is slowing down," he said, citing reduced growth data in the euro zone and Britain as examples.
Energy shares led Asian stock indexes higher, pushing the 47-country MSCI world equity index .MIWD00000PUS to its highest level in three weeks. It is now positive on the year, up 0.3 percent from its starting level on Jan. 1.
European shares largely took their cues from Asian and U.S. peers and rose, but the gains were tempered as British phone company BT BT.L reported disappointing results and the pan European STOXX 600 Index .STOXX was only marginally higher.
Britain's FTSE 100 Index was still up on the day .FTSE ahead of a Bank of England policy meeting at which rates are expected to be kept on hold, a sea change from expectations a few weeks ago, when a hike seemed nailed on.
Overall, the U.S. Federal Reserve remains the only major central bank that appears to be on course for rate hikes, with New Zealand's Reserve Bank saying it will keeping the Official Cash Rate (OCR) at 1.75 percent "for some time to come". New Zealand dollar retreated to a five-month low of $0.6915 NZD=D4 .
POLITICAL RUCTIONS
Italian government debt IT10YT=RR sold off sharply in early trades, with 10-year yields hitting a seven-week high as Italy's 5-Star Movement and the far-right League moved closer to the formation of a government of anti-establishment parties.
A crucial obstacle was removed late on Wednesday when former prime minister Silvio Berlusconi, the League's main ally, gave his green light to the talks, accepting a demand from 5-Star that his Forza Italia party take no part in the next government. is this the only electoral concern on investor minds today; in Malaysia, an alliance of opposition parties spearheaded by Mahathir Mohamad won the general election, putting the 92-year old strongman on course for a return to the prime minister's office he occupied for 22 years. the past day the Malaysian ringgit has slid nearly 3 percent in the one-month non-deliverable forward market and the cost of insuring the country's debt against default has risen.
Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS advanced 0.6 percent, while Japan's Nikkei .N225 climbed 0.3 percent. South Korea's KOSPI .KS11 rose 0.5 percent and Shanghai SSEC was 0.2 percent higher.
Brent crude futures LCOc1 were up 0.8 percent to $77.66 a barrel, the highest since November 2014 and building on gains of about 3 percent on Wednesday. U.S. light crude futures CLc1 were up 0.6 percent at $71.59. O/R