Global Market Today: Asian stocks drop on hawkish Warsh tone, oil gains

Asian stocks fell and the dollar maintained its gains after Federal Reserve Chair Kevin Warsh delivered hawkish comments, fueling expectations of an interest rate hike next month. The MSCI's Asia Pacific equities gauge declined by 0.8%, with technology shares leading the decline, particularly the Kospi Index, which dropped over 3% due to heightened artificial intelligence investments.

Futures on the S&P 500 Index lost 0.5%, while those on the Nasdaq 100 Index retreated 0.7% following lower closing prices on Friday, amid rising Middle East tensions. Brent crude oil rose by 1.6% to $89.50 a barrel after the U.S. military struck Iranian rocket launchers in the Strait of Hormuz, ending weeks of relative calm. The dollar experienced a narrow range against major peers after posting its largest gain in about a month following Warsh's remarks.

The yen remained near 160.04 per dollar, after reaching its weakest level in a month. These developments signaled a tentative start to the week, following Warsh's declaration to bring inflation back to target in his Jackson Hole speech, which bolstered bets that the Fed could hike as early as next month. US semiconductor stocks declined, bonds fell, and yields on rate-sensitive two-year Treasuries spiked sharply higher, as the likelihood of a rate increase rose to 60%.

Analysts noted that markets appeared poised for a turbulent beginning to the trading week, with geopolitical risks in the Middle East exacerbating the situation. The recent US military action against Iran marked the first such attack in over a month, as part of President Trump's strategy to compel Iran to negotiate by straining its economy.

Traders had increasingly bet on a quarter-point rate hike next month, and potentially further policy tightening over the next year, according to swaps data from Bloomberg. Warsh's speech highlighted his concerns about persistent inflation and the need for policy confidence, without explicitly endorsing a September rate hike. Market sentiment was influenced by the hawkish tone from Fed Chair Warsh, and traders anticipated further dollar correction.