Asian equity markets slumped Wednesday as renewed US military action on Iran drove oil prices higher and sparked a wave of selling across global bond markets that rippled into the region.
The MSCI Asia-Pacific Index fell 1.5%, while South Korea's KOSPI dropped more than 3% and Japan's Nikkei 225 declined 2.6%. The moves reflected broader market anxiety stemming from the geopolitical escalation.
Oil Rallies on Supply Concerns
Brent crude rose 1.3% to $95.91 a barrel Wednesday, extending gains that began after the United States launched fresh airstrikes on Iran on Tuesday. The attack briefly pushed oil to its highest level in five weeks.
The escalation renewed concerns about potential disruptions to the Strait of Hormuz, a critical global shipping route. Analysts noted that fears of supply disruptions have fueled inflation concerns, prompting a sell-off across major stock markets and a broader rout in global bonds.
Bond Yields Hit Multi-Year Highs
The US 10-year Treasury yield reached an intraday high of 4.8122%, its highest level in almost three years. Japan's 5-year government bond yield climbed to 2.295%, a record level.
Rising bond yields have already pressured Asian technology and chip stocks in recent weeks. Wednesday's move extended that pressure into a broader equity decline. Analysts cautioned that if the bond selloff continues, policymakers may need more aggressive measures to stabilize yields.
Crypto and Global Markets Follow
Crypto assets weakened alongside broader risk sentiment, with Bitcoin falling to $77,000 and Ether dropping to $2,410.73. Wall Street indices also declined overnight as rising bond yields weighed on equities, with the S&P 500 slipping 0.7% and the Nasdaq Composite falling 1%.
Market participants have raised their expectations for Federal Reserve action, with traders now pricing in a 67% chance of a rate increase at the Fed's two-day meeting ending September 16, up from 39.6% a week earlier.
