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

Asian markets experienced a significant decline at the onset of trading on Wednesday, as a series of attacks by the U.S. on Iran sent oil prices soaring and triggered bond market panic worldwide. The MSCI’s Asia-Pacific index outside Japan saw a 0.8% drop, while South Korea's KOSPI and Japan's Nikkei 225 each fell by 3% and 2.2% respectively.

U.S. S&P 500 e-mini futures remained flat, while Brent crude futures continued their upward trend, reaching a second day of gains and reaching $95.34 per barrel. The threat of additional disruptions in the Strait of Hormuz has reignited concerns over inflation, leading to a sell-off in global stocks and bonds. U.S. bond yields climbed 0.4 basis points to 4.798% as the U.S. dollar strengthened.

Despite a slight slowdown in new orders, U.S. manufacturing activity remained in expansionary territory, according to the Institute for Supply Management. Fed funds futures indicate a 67% probability of a 25-basis-point interest rate increase at the Federal Reserve’s upcoming meeting, reflecting investors' expectations of higher borrowing costs. Gold prices remained steady at $4,328.59 per ounce, while bitcoin and ether saw slight declines.