Precise Investors Editorial Team
MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.6%
Asian stocks dropped on Wednesday while oil prices surged as escalating tensions in the West Asia unsettled markets, dimming hopes for an end to the months-long war that has pushed commodities higher and stoked inflation worries.
MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.6%. Nikkei shed 0.9% while the tech-heavy KOSPI plunged 2% in a volatile week where AI stocks have come under pressure.
Oil prices jumped nearly 1% in early trade, moving away from a seven-week low hit in the previous session. Brent futures added 0.9% to $92.29 a barrel.
Geopolitics is being treated as a headline risk, not a macro shock for now, said Charu Chanana, chief investment strategist at Saxo in Singapore.
She said that oil holding around $90 despite fresh Iran headlines suggests markets are not pricing a sustained supply disruption. That leaves room for a bigger repricing if attacks on energy infrastructure or shipping routes escalate.
Japan’s wholesale inflation accelerated in May at the fastest pace in three years as price pressures from the war broadened, data showed on Wednesday, adding to the case for further interest rate hikes by the Bank of Japan.
A rate hike from the BOJ at the June 16 policy meeting is now almost fully priced in, with analysts saying persistent weakness in the yen.
The market can usually absorb geopolitical noise rather well when energy prices stay contained, said Anthony Saglimbene, chief market strategist at Ameriprise.
Saglimbene said: It has less room for comfort when oil prices, inflation data, and Fed policy all lean in a direction that becomes less supportive of stocks over the near term. This is the risk we see building in the market right now.
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