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

Asian markets experienced a significant decline on Wednesday following renewed US airstrikes on Iran, which led to a surge in oil prices and a sell-off in global bond markets. The MSCI Asia-Pacific index excluding Japan fell by 1.5%, while South Korea's KOSPI dropped more than 3% and Japan's Nikkei 225 declined by 2.6%. The S&P 500 e-mini futures dipped by 0.1%.

Brent crude futures continued to rise, gaining 1.3% to $95.91 a barrel after the US attacks earlier pushed oil prices to a five-week high. The prospect of further disruptions to the Strait of Hormuz has raised concerns about inflation, prompting a sell-off in stocks and bonds worldwide. US 10-year Treasury bond yields surged to 4.8122%, the highest in nearly three years, while Japan's 5-year government bond yield reached an all-time high of 2.295%.

The sell-off in global bond markets has caused anxiety across asset classes, with Westpac analysts predicting a volatile month ahead. The Reserve Bank of New Zealand raised interest rates by 25 basis points to 2.75%, as expected by markets, but dovish language in the central bank's statement affected the kiwi dollar, which fell 0.6% to $0.5855.

The US dollar index rose 0.1% to 99.79, its highest since August 17. On Wall Street, the S&P 500 slipped 0.7%, and the Nasdaq Composite fell 1% as higher government bond yields weighed on equities. While manufacturing activity moderated in the US in August, it remained in expansionary territory. Fed funds futures suggest a 67% chance of a 25-basis-point rate increase at the Federal Reserve's next meeting in two weeks.

Gold prices dropped 0.8% to $4,295.70 an ounce, while bitcoin declined 0.6% to $76,979.55, and ether fell 0.9% to $2,397.78.