Key facts
- Asian stock markets declined amid escalating Middle East conflict and Iran's claim to close the Strait of Hormuz.
- Oil prices surged, with Brent crude futures rising 3.3% to $78.49 per barrel.
- The U.S. dollar strengthened against the yen, euro, and British pound.
- Fed fund futures are pricing a 52.1% probability of two or more rate hikes by the Fed's December meeting.
- Gold prices declined as rising yields weighed on the non-interest-bearing asset.
Asian share markets declined as intensified fighting in the Middle East and Iran's claim of closing the Strait of Hormuz sent oil prices surging, rekindling inflation fears. The U.S. dollar and bond yields gained as traders increased the probability of a Federal Reserve interest rate hike.
Brent crude futures rose 3.3% to $78.49 a barrel, while U.S. crude futures were up 3.4% at $73.83. The dollar index, measuring its strength against a basket of six currencies, held steady at 101.07 after rising as much as 0.2% to its highest level since July 8. The euro weakened 0.1% to $1.1403, and the British pound slipped 0.1% to $1.3383.
Against the yen, the U.S. dollar was up 0.1% at 161.92 yen. Fed funds futures are pricing an implied 52.1% probability of two or more rate hikes by the Federal Reserve by the time of its December meeting, compared to a 47.6% chance on Friday. Inflation risks are expected to remain in focus ahead of U.S. CPI data on Tuesday and PPI gauges the following day.
The Bank of Japan may revise up its economic growth forecast for fiscal 2026 and maintain its focus on the risk of an inflation overshoot, according to sources familiar with the central bank's thinking. In cryptocurrencies, bitcoin was down 0.6% at $63,770.42, while ether slipped 1.1% to $1,801.28.