SQL Azure fully supports local transactions. TechNet has released an interesting wiki article more about how SQL Azure handles transactions, as well as describing some of the basics.
"SQL Azure supports local transactions. These types of transactions are done with the Transact-SQL commands BEGIN TRANSACTION, ROLLBACK TRANSACTION, COMMIT TRANSACTION. They work exactly the same as they do on SQL Server.
SQL Azure default database wide setting is to enable read committed snapshot isolation (RCSI) by having both the READ_COMMITTED_SNAPSHOT and ALLOW_SNAPSHOT_ISOLATION database options set to ON, learn more about isolation levels here. You cannot change the database default isolation level. However, you can control the isolation level explicitly on a connect ion. On way to do this you can use any one of these in SQL Azure before you BEGIN TRANSACTION":