Asian markets tumble as US-Iran fighting lifts oil and bond yields

Asian markets opened lower on Wednesday as renewed tensions between the US and Iran sent oil prices soaring and drove up bond yields globally. The MSCI's Asia-Pacific index fell 0.8% in early trading, with South Korea's KOSPI down 3% and Japan's Nikkei 225 slipping 2.2%. Brent crude futures continued to rise, gaining 0.7% to $95.34 a barrel, following the US airstrikes on Iran on Tuesday.

This has reignited concerns about potential disruptions in oil shipments through the Strait of Hormuz, leading to anxiety over inflation and causing stocks to sell off across major markets. The yield on the US 10-year Treasury bond increased to 4.798%, while the US dollar index remained near its highest level in two weeks at 99.67.

US equities suffered as the S&P 500 dropped 0.7% and the Nasdaq Composite fell 1%, due to higher government bond yields negatively impacting equity prices. Although US manufacturing activity slowed in August, it still remained in expansionary territory, according to the Institute for Supply Management's data released on Tuesday.

Fed futures suggest a 67% chance of a 25-basis-point interest rate hike at the Fed's meeting on September 16, up from 39.6% a week earlier. Gold and cryptocurrencies remained relatively stable, with gold at $4,328.59 an ounce and Bitcoin down 0.2% to $77,246.57.