Asian stocks wilt as Brent holds above US$100

Asian stocks experienced a decline on Thursday amid a surge in Middle East shipping attacks, driving oil prices above $100 per barrel and creating investor uncertainty ahead of critical US inflation data. The benchmark 10-year US Treasury yield remained stable at 4.8406% after peaking since 2023 the prior day, as the treasury department announced a $6 billion buyback of longer-dated bonds, disappointing some investors seeking more action.

Brent crude futures rose to $101.4 per barrel in early trading, breaking the psychologically important $100 mark for the first time since July as traders contemplated the potential for inflationary pressure. Analyst Nick Twidale stated that the $100 level is a significant event for the market, potentially convincing some to enter positions after holding back due to hopes of a Middle East peace deal.

MSCI's Asia-Pacific index excluding Japan fell by 1%, with Japan's Nikkei and South Korea's Kospi also dropping over 1%. The Middle East conflict's escalation, particularly in Saudi Arabia and Yemen, exacerbates the situation, threatening global energy supplies. Higher oil prices and elevated bond yields dampen investor sentiment, setting the stage for upcoming central bank meetings.

The euro held steady at $1.16322 ahead of the European Central Bank's policy decision, with a focus on policymakers' comments to gauge further rate adjustments. The Federal Reserve and Bank of Japan are scheduled for meetings next week, with the Federal Open Market Committee likely to raise rates, as indicated by Fed funds futures traders.

Inflation reports from the US will be crucial in determining the Fed's decision at its September 15-16 meeting. Currency strategist Carol Kong expects the BOJ to raise interest rates and a hike will be necessary to sustain the recent yen rally. If no increase occurs, the yen could weaken sharply.