Speculation had been swirling that Trump would throw his lot in with Israel, but on Thursday he said he would decide "within the next two weeks" whether to involve the United States, giving diplomacy a shot to end the hostilities.
While tensions are sky high amid fears of an escalation, the US president's remarks suggested the crisis could be prevented from spiralling into all-out war between the Middle East foes.
Since Israel first hit Iran last Friday, the two have exchanged deadly strikes and apocalyptic warnings, though observers said the conflict has not seen a critical escalation.
European foreign ministers were due to meet their Iranian counterpart on Friday in Geneva.
In a statement read out by White House Press Secretary Karoline Leavitt, the president said: "Based on the fact that there's a substantial chance of negotiations that may or may not take place with Iran in the near future, I will make my decision whether or not to go within the next two weeks."
Leavitt added: "If there's a chance for diplomacy the president's always going to grab it, but he's not afraid to use strength as well."
Both main oil contracts were down around two percent Friday but uncertainty prevailed and traders remained nervous.
"Crude still calls the shots, and volatility's the devil in the room -- and every trader on the street knows we're two headlines away from chaos," said Stephen Innes at SPI Asset Management.
"Make no mistake: we're trading a geopolitical powder keg with a lit fuse.
"President Trump's two-week 'thinking window' on whether to join Israel's war against Iran is no cooling-off period -- it's a ticking volatility clock."
Stocks were mixed following a public holiday in New York, with Hong Kong, Shanghai and Singapore all up.
Seoul's Kospi led the gains, rising more than one percent to break 3,000 points for the first time in nearly three and a half years.
The index has risen every day except one since the June 4 election of a new president, which ended months of political crisis and fuelled hopes for an economic rebound.
Tokyo fell as Japanese core inflation accelerated, stoked by a doubling in the cost of rice, a hot topic issue that poses a threat to Prime Minister Shigeru Ishiba ahead of elections next month.
There were also losses in Sydney, Taipei, Manila and Jakarta.
The Middle East crisis continues to absorb most of the news but Trump's trade war remains a major obstacle for investors as the end of a 90-day pause on his April 2 tariff blitz approaches with few governments reaching deals to avert them being imposed.
"While the worst of the tariffs have been paused, we suspect it won't be until those deadlines approach that new agreements may be finalised," said David Sekera, Chief US Market Strategist at Morningstar.
"Until then, as news emerges regarding the progress and substance of trade negotiations, these headlines could have an outsize positive or negative impact on markets."
- Key figures at around 0230 GMT -
Brent North Sea Crude: DOWN 2.4 percent at $76.94 per barrel
West Texas Intermediate: DOWN 1.9 percent at $73.62 per barrel
Tokyo - Nikkei 225: DOWN 0.1 percent at 38,445.57 (break)
Hong Kong - Hang Seng Index: UP 0.7 percent at 23,400.62
Shanghai - Composite: UP 0.1 percent at 3,363.93
Euro/dollar: UP at $1.1519 from $1.1463 on Thursday
Pound/dollar: UP at $1.3486 from $1.3429
Dollar/yen: DOWN at 145.25 yen from 145.63 yen
Euro/pound: UP at 85.41 pence from 85.36 pence
London - FTSE 100: DOWN 0.6 percent at 8,791.80 (close)
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