Asian shares waver as oil and yields rise ahead of Fed, BOJ meetings

Asian shares hesitated on Tuesday as investors grappled with Middle East tensions and calls for a slowdown in AI development, alongside rising oil prices and higher bond yields. Yemen's Houthis attacked Saudi Arabia, while Riyadh blamed Iran-backed fighters in Iraq for disrupting a pipeline that could impact up to 4% of global oil supply.

Gulf Arab states postponed talks with Iran. Oil prices surged, with US crude increasing 1.27% to $102.68 a barrel and Brent climbing 1.21% to $106.96 per barrel. Analysts expressed concern that higher crude oil prices could fuel inflation and lead to higher interest rates. MSCI's Asia-Pacific index dropped 0.12%, led by South Korea's 0.25% decline.

Japan's Nikkei edged 0.19% higher after an initial drop. Samsung Electronics saw a 0.2% drop, while Kioxia rose 3.3%. The Federal Open Market Committee will meet later to decide on a potential rate hike, with markets pricing a 90% chance of an increase, marking the Fed's first rise since mid-2023. Analysts at Morgan Stanley predicted a 25 basis-point hike for this week and December.

U.S. 10-year Treasury yields touched 5% for the first time since 2023, and Germany's 10-year bond yield surpassed 3.51%, its highest since 2009. Japan's 10-year government bond yield also rose to 3%. The Bank of Japan is expected to raise its rate by 25 basis points to 1.25% at its meeting on Friday. The dollar index rose 0.05% to 99.53, with the euro down 0.03% to $1.1543, and the dollar gained 0.17% against the yen at 154.61. Gold slipped 0.15% to $4,291.59 per ounce, while silver declined 0.31% to $63.03 per ounce.