Oil nears $100, Asia stocks sour on Iran-US tensions
Photo: REUTERS
Brent crude rallied toward $100 per barrel on Wednesday, suppressing sentiment across Asian stock markets as escalating US-Iran attacks heightened global inflation concerns ahead of upcoming US consumer price index data.
At the same time, the Japanese yen strengthened toward its near seven-month high against the US dollar reached on Tuesday. Currency traders rapidly closed short positions in the yen amid rising expectations for accelerated Bank of Japan interest rate hikes and a potential surge of Japanese capital repatriation.
Meanwhile, the euro advanced slightly ahead of Thursday’s European Central Bank policy decision, as financial markets widely anticipate an interest rate increase driven by inflationary pressures from the Iran war.
On Tuesday, Houthis in Yemen launched missile strikes against several Saudi Arabian cities, entangling a key US ally further into the regional conflict. In response, US military forces struck multiple Iranian oil tankers, while Iran targeted a US military base in Jordan.
As a result, crude oil prices climbed for a fourth consecutive trading session on Wednesday, surging more than $1 during early market hours.
Brent crude futures surged $1.57 to $99.49 per barrel, reaching their highest price point since late June. US West Texas Intermediate crude gained $1.60 to reach $94.63 per barrel. Regional equity markets showed mixed results, as Sydney stocks dropped around 0.3 percent and Hong Kong’s Hang Seng index fell 0.6 percent, while mainland Chinese blue-chip equities edged up 0.2 percent.
A noticeable rebound in technology shares - specifically semiconductor and artificial intelligence stocks - lifted other regional benchmark indices. Japan’s Nikkei 225 climbed 0.6 percent following a 1.7 percent drop on Tuesday, South Korea’s KOSPI jumped 1.6 percent, and Taiwan’s TAIEX rose 0.6 percent.
In corporate developments, shares of Japanese cable manufacturers surged after Verizon and Corning signed a major commercial agreement regarding high-density optical fiber. Overnight, the Philadelphia SE Semiconductor Index gained 1.3 percent, even though Wall Street’s three primary stock indices registered declines.
US S&P 500 futures rose 0.1 percent after the cash index dropped 0.6 percent on Tuesday. Analyzing global market behavior, Chris Weston, head of research at Pepperstone, noted in a client update, “Across several of the major macro markets, we see indecision in the price action -- tight ranges and a general holding/consolidation pattern.”
Weston highlighted that Brent crude serves as “one of the clearest real-time signals for sentiment” across global financial markets, adding that $100 “now feels like a highly achievable level.”
Intensifying inflation worries have continuously pressured global equities in recent weeks while pushing government bond yields higher, as investors price in increased probabilities of central bank policy tightening. Market participants eagerly await official US CPI data scheduled for release on Friday.
Traders assign nearly equal odds to either a quarter-point interest rate hike or a policy pause from the US Federal Reserve on Wednesday of next week, while considering a quarter-point rate increase from the Bank of Japan two days later as virtually guaranteed.
In currency trading, the yen gained around 0.2 percent to 153.66 per dollar, approaching its previous session high of 152.89. Over the last five trading sessions, the Japanese currency surged roughly 4 percent.
Hawkish commentary from Bank of Japan officials initially ignited this upward momentum, which then gathered speed as technical level breaches triggered cascading buying orders. Meanwhile, market participants view a quarter-point rate increase by the European Central Bank on Thursday as almost certain.
The euro added 0.1 percent to $1.1629, remaining within its established three-week trading channel.
British sterling remained little changed at $1.3545 ahead of the Bank of England’s upcoming policy announcement next Thursday, with economic analysts forecasting that the central bank will keep benchmark interest rates unchanged through the end of the year.
Australian dollar advanced 0.1 percent to $0.7222. In digital assets, Bitcoin moved upward to trade at $78,680.60. Gold prices rose 0.3 percent to trade near $4,368 per ounce.
Source: Reuters (adapted)
