Asian Markets Fall as Oil Stays Above USD 100 Amid US-Iran Tensions

Asian markets declined on Thursday as investors reacted to rising oil prices and continued tensions between the United States and Iran. Crude oil remained above USD 100 a barrel after a sharp rise on Wednesday, while weaker trading on Wall Street added to pressure across the region.

Brent crude surged 3.4 per cent on Wednesday, moving above USD 100 a barrel for the first time since July. It eased slightly to around USD 101 early Thursday. Recent US-Iran attacks have disrupted oil shipments through the Strait of Hormuz, a crucial route for global energy supplies. US President Donald Trump said oil prices were unlikely to decline until after the US midterm elections.

Japan's Nikkei 225 fell 0.8 per cent to 64,597.46, while South Korea's Kospi declined 0.9 per cent to 6,989.06. Hong Kong's Hang Seng dropped 1.4 per cent to 24,932.95 and the Shanghai Composite slipped 0.3 per cent to 3,939.43.

Australia's S&P/ASX 200 fell 1.5 per cent to 8,774.50, while Taiwan's Taiex declined 0.8 per cent. US stock futures were modestly higher in early Thursday trading despite the weakness across Asian markets.

Wall Street also ended lower on Wednesday. The S&P 500 declined 0.5 per cent, the Dow Jones Industrial Average lost 0.8 per cent and the Nasdaq composite fell 0.6 per cent. All three indexes were heading toward weekly losses.

Oil prices remained a major influence on investor sentiment after the US destroyed five Iranian tankers on Tuesday as tensions between the two countries escalated. The conflict, which began in February, has severely disrupted traffic through the Strait of Hormuz, a waterway that previously carried around one-fifth of the world's oil supply.

Retail companies were among the biggest losers in US trading. Amazon declined 1.8 per cent, Starbucks fell 1.9 per cent and Home Depot lost 1 per cent. Energy was the only S&P 500 sector to gain as oil companies benefited from higher crude prices. Exxon Mobil rose 2.2 per cent and Chevron advanced 1.9 per cent.

The surge in oil has also increased fuel costs and added to inflation concerns. US petrol prices have climbed around 32 per cent from a year earlier to USD 4.22 a gallon. Higher fuel prices put pressure on household budgets while also increasing transportation and shipping expenses.

Diesel prices have also continued to rise after reaching a record high on Friday. The average price reached USD 5.94 a gallon overnight, about 9 cents above Friday's level.

Inflation was already proving difficult to control before the US-Iran conflict, partly because of the wider US trade war. Investors were awaiting the latest Producer Price Index data for August on Thursday, followed by Consumer Price Index figures on Friday. Both reports are expected to provide further clues about whether inflation remains above 3 per cent, compared with the Federal Reserve's 2 per cent target.

Elsewhere, Meta Platforms gained 6.6 per cent after the company behind Facebook and Instagram introduced a personal artificial intelligence agent called Muse for users aged 18 and above. The tool is designed to assist with everyday activities including scheduling and shopping.

Higher US Treasury yields also added to pressure on equities. The Treasury Department announced plans to buy back as much as USD 6 billion of long-term debt. The move followed an August announcement outlining an unusually large debt buyback programme aimed at managing rising yields.

Higher bond yields can increase borrowing costs for companies and make other investments, including stocks, less attractive. In early Thursday trading, the US dollar slipped to 153.42 Japanese yen from 153.54 yen, while the euro strengthened slightly to USD 1.1640 from USD 1.1632.

With oil prices above USD 100, inflation concerns and elevated bond yields continuing to unsettle investors, Asian and US markets remained under pressure as traders assessed the economic impact of the escalating US-Iran tensions.