Shares slip in Asia as oil climbs, rate hikes loom

Asian share markets suffered declines on Monday, driven by oil price surges and the looming possibility of interest rate hikes in the United States and Japan. Brent crude oil prices rose 3% following new attacks on Saudi Arabian oil infrastructure and threats to global energy supplies. These events, combined with a postponed meeting between Iran and Gulf Arab states in Oman, fueled concerns of prolonged elevated oil prices, which could fuel worldwide inflation.

The U.S. consumer price report released on Friday, reflecting uncomfortably high inflation, increased the probability of an 86% chance of a 25 basis point rate hike by the Federal Reserve on Wednesday, potentially marking the first increase since mid-2023. JPMorgan's chief U.S. economist, Michael Feroli, anticipates the Federal Reserve to implement two rate hikes this year, potentially in September and December.

The risk of the Federal Reserve failing to follow through on their commitment could tarnish the Fed's credibility. Brent futures climbed 3.1% to $107.84 per barrel, while U.S. crude rose 2.8% to $102.85 per barrel. Nikkei futures dropped 2% to 63,260, while S&P 500 and Nasdaq futures declined 0.5% and 1.0%, respectively.