Bonds shaky, oil eases off highs amid trade, peace talks

Japanese bonds and Asian equities faced uncertainty on Thursday amid Middle East tensions and prospects for U.S.-China talks. The 10-year Japanese government bond yield surged to a 30-year high following a sharp sell-off in the U.S. market overnight. Oil prices eased from recent highs, while the greenback held gains after Iran's leader vowed not to surrender.

Market participants awaited central bank speeches and economic releases, including U.S. jobless claims, for clues on future interest rate hikes. A summit between President Trump and Chinese President Xi Jinping was also under focus, with hopes for progress on trade relations. The MSCI Asia ex-Japan index fell 0.64 percent, while Japan's Nikkei 225 rose 1.73 percent.

Australian shares hit a three-month low, with the S&P/ASX 200 index falling 1.2 percent. Treasury Secretary Bessent announced a deal on an extension of the trade truce between Washington and Beijing. Bond yields climbed to multi-year highs due to traders' expectations of central bank hikes to curb persistent inflation. Japan's 10-year bond yield rose 8 basis points to 3.06 percent, and the 30-year yield increased 5.5 basis points to 4.12 percent.

The U.S. 10-year Treasury yield held steady at 5.11 percent. Central bank officials remained hawkish as rising oil prices fueled inflationary pressures. Fed Governor Michael Barr indicated more rate hikes may be needed. Geopolitical tensions kept energy prices elevated, with Iranian officials communicating with U.S. envoys at the UN General Assembly, but little progress toward ending the conflict.

Trump reiterated threats of escalation, while Iran's leader vowed not to yield. Brent crude fell 1 percent to $102.05 a barrel, while U.S. West Texas Intermediate slipped 0.74 percent to $91.48 a barrel. Spot gold gained 0.35 percent to $4,301.89 an ounce. The dollar index fell 0.04 percent to 101.09, while the euro slipped 0.02 percent to $1.14.

The Japanese yen strengthened 0.24 percent to 157.91 per dollar. Economic data showed U.S. initial jobless claims likely rose to 201,000 in the week ended September 19, while continuing claims increased 15,000 to 1.745 million. New home sales are forecast to edge up to 615,000 units in August. European stock indices were lower.