Asian stocks wilt as Brent holds above US$100

Asian stock markets experienced a decline on Thursday, with the Nikkei in Japan and the Kospi in South Korea dropping more than 1%. The decrease was attributed to the ongoing conflict in the Middle East, which has led to a surge in oil prices above $100 a barrel. This development has caused anxiety among investors as they await US inflation data that will influence monetary policy.

Treasury yields remained stable at 4.8406%, following a recent peak. Brent crude futures rose to $101.4 per barrel, marking a significant milestone since July. Nick Twidale, chief market strategist at ATFX Global, believes this milestone will prompt many market participants to reconsider their positions due to concerns over potential inflationary pressures.

MSCI's Asia-Pacific index, excluding Japan, fell by 1%. Historically, September has been a challenging month for stock markets. The conflict in the Middle East has expanded, with fighting between Saudi Arabia and Houthis in Yemen exacerbating global energy supply concerns. Central bank meetings in the coming days will likely intensify market uncertainty.

The euro remained unchanged ahead of the European Central Bank's policy decision, where a rate hike is anticipated. The Federal Reserve and the Bank of Japan are scheduled to meet next week, with the likelihood of a rate hike by the Fed at 60%. Inflation reports from the US, including producer prices and consumer prices, are expected to have a significant impact on the Fed's decision.

The yen has also strengthened due to expectations of a more aggressive BOJ rate hike, with the currency gaining 4% in September. Should the BOJ fail to deliver a hike or communicate a more aggressive tightening policy, the yen may face further depreciation.