Key facts
- Asian stocks slumped as renewed U.S. airstrikes on Iran boosted oil prices and heightened inflation concerns.
- The MSCI Asia-Pacific index fell 0.8%, with South Korea's KOSPI down 3% and Japan's Nikkei 225 down 2.2%.
- Brent crude futures rose to $95.34 a barrel amid fears of disruptions to the Strait of Hormuz.
- The U.S. 10-year Treasury yield edged up to 4.798%, while the U.S. dollar index held near a two-week high.
- U.S. stocks closed lower overnight, with the S&P 500 down 0.7% and the Nasdaq Composite down 1%.
Asian stocks slumped at the start of the trading session on Wednesday as renewed U.S. attacks on Iran pushed oil prices higher and revived inflation concerns, ending an uneasy calm. The MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.8% in early trading, with South Korea's KOSPI dropping 3% and Japan's Nikkei 225 sinking 2.2%. S&P 500 e-mini futures were flat.
Brent crude futures extended gains into a second day, rising 0.7% to $95.34 a barrel after the U.S. launched airstrikes on Iran, which had earlier pushed oil prices to a five-week high. Ryan Isherwood, founder and CEO of Significance Capital, noted that increased hostilities could complicate the interest-rate outlook, particularly with traders sharply increasing bets on a September rate hike after Federal Reserve Chair Kevin Warsh emphasized taming price pressures.
Isherwood added that the Fed could be in a bind if higher oil costs start slowing economic growth. Equities were also under pressure from elevated yields on risk-free U.S. Treasuries, which reduce the appeal of buying stocks. Investors are also contending with seasonal weakness, as September has historically been the weakest month for stocks.