Asian Markets Falter as Oil Prices Surge Amid Middle East Tensions

Asian markets struggled to find direction on Tuesday as investors weighed several factors, including rising oil prices and Middle East tensions.

The Yemen's Iran-aligned Houthis launched a new attack on Saudi Arabia on Monday, which could disrupt up to 4% of global oil supply, according to Riyadh. This led to a 1.27% increase in US crude prices to $102.68 per barrel, while Brent rose 1.21% to $106.96 per barrel.

Analyst Yokoo Akihiko from Mitsubishi UFJ Bank noted that markets are likely to remain focused on the risk of higher crude oil prices adding to inflationary pressures and pushing interest rates higher.

The Federal Reserve's two-day meeting later in the day is also on investors' minds, with a 90% chance of a rate hike expected. Analysts at Morgan Stanley predict a 25 basis-point hike on Wednesday and in December, citing signs of second-round effects from energy prices and strong demand tied to AI-related investment.