Asia Stocks Decline, Oil Rises Amid Middle East Risks – Reuters

By Kevin Buckland

TOKYO – Asian stock markets experienced a downturn on Wednesday, responding to a sell-off on Wall Street triggered by Iran’s missile strike on Israel, raising concerns about a potential escalation in the region. This geopolitical unrest led to increased fears of supply disruptions, prompting a rise in oil prices.

Investors turned to safer assets, resulting in a decline in U.S. Treasury bond yields during Asian trading hours, while gold prices remained elevated, hovering near an all-time high.

The U.S. dollar was near its strongest level in three weeks against the euro. The dollar’s strength was further supported by robust U.S. job market data, which indicated a smaller potential interest rate cut by the Federal Reserve in November, contrasting with inflation trends in the eurozone that suggested the European Central Bank might ease rates this month.

As of 0022 GMT, key Asian indices saw significant declines: Japan’s index fell by 1.5%, South Korea’s by 1.3%, and Australia’s benchmark by 0.3%. The MSCI index, which tracks Asia-Pacific shares, slipped approximately 0.5%.

Hong Kong’s market was yet to open following a holiday on Tuesday, while mainland Chinese markets were closed for a week-long holiday. Trading in Taiwan was interrupted due to a typhoon.

Futures for U.S. stock indices also weakened by 0.16%, following a 0.9% drop in the cash index the night before.

"In instances of market volatility, geopolitical issues often take precedence over economics, earnings, or central banks’ actions, largely due to investors’ difficulties in pricing risks associated with these events," noted Chris Weston, head of research at Pepperstone.

Weston added, "While markets usually stabilize positively after such events, the potential for significant tail risks remains. Current conditions are fluid, and any shifts in rhetoric from Israel or Iran could have a substantial impact on market sentiment."

Iran announced that its missile attacks on Israel had concluded, barring further provocations. However, both Israel and the U.S. pledged to retaliate.

Oil futures rose over 1% to $74.33 per barrel, building on a 2.5% increase from Tuesday. U.S. WTI futures also gained 1.3%, reaching $70.73 per barrel after a 2.4% rally the previous day.

Gold prices decreased slightly by 0.16% to $2,658.63 per ounce, following a more than 1% increase in the previous session, which brought prices close to last month’s record high of $2,685.42.

Benchmark 10-year Treasury yields fell by 1.5 basis points to 3.7278%. The dollar index, which measures the U.S. currency against the euro and five other major currencies, remained steady at 101.21 after reaching a high of 101.39 on Tuesday, the highest level since September 19.

The euro was little changed at $1.1070, following a 0.6% drop the day before, when it fell to $1.1046 for the first time since September 12. Eurozone inflation data released on Tuesday showed rates falling below the ECB’s target of 2% last month, fueling speculation of a quarter-point rate cut at the upcoming meeting on October 17.

Meanwhile, U.S. data released overnight reflected a solid economy, particularly after Fed Chair Jerome Powell indicated a reluctance to consider another 50 basis point rate cut during the upcoming central bank meeting. Job openings unexpectedly increased in August, following two consecutive months of decline, though hiring showed signs of softness consistent with a slowing labor market.

Later on Wednesday, private payroll data will be released, ahead of key monthly non-farm payroll figures scheduled for Friday. Attention will also turn to U.S. politics, with a vice-presidential debate scheduled between Democrat Tim Walz and Republican JD Vance.