Asian equities sank in Wednesday’s trading as renewed US airstrikes on Iran pushed oil prices higher and triggered a global bond selloff that spilled into the region.
The MSCI Asia-Pacific Index, a broad gauge of stocks outside Japan, fell 1.5%, while South Korea’s KOSPI dropped more than 3% and the Nikkei 225 slid 2.6%.
Oil Jumps as Bond Yields Hit Multi-Year Highs
Brent crude rose 1.3% to $95.91 a barrel Wednesday. The gains extended a rally that began after the United States launched fresh airstrikes on Iran on Tuesday. The attack briefly pushed oil to a five-week high.
The strikes renewed fears over disruptions to the Strait of Hormuz.
“The threat of further disruptions to the Strait of Hormuz has brought about renewed anxiety over inflation, driving a selloff in stocks across most major markets and a rout in global bond markets,” Westpac analysts wrote.
DBS analysts added that if the bond rout does not stabilize, policymakers may need more aggressive measures to cap yields.
The US 10-year Treasury yield hit 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.
Most Markets are Taking a Hit
Meanwhile, crypto assets slipped alongside broader risk sentiment. Bitcoin fell to $77,000, and Ether dropped to $2,410.73, based on the latest BeInCrypto data.
Rising bond yields have already been rattling Asian tech and chip stocks in recent weeks. Wednesday’s move extended that pressure into a broader equity selloff.
However, Wall Street stocks also fell overnight as rising bond yields weighed on equities. The S&P 500 slipped 0.7% and the Nasdaq Composite fell 1%.
Traders now see a 67% chance the Federal Reserve raises rates at its two-day meeting ending September 16. That is up from a 39.6% chance a week earlier, according to the CME Group’s FedWatch tool. The tool estimates rate-hike odds from futures pricing.
With yields still climbing and a Fed decision two weeks away, markets face a volatile stretch. Wednesday’s selloff shows how directly the widening Iran conflict is now moving oil, Wall Street, and Bitcoin.
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