Asian Markets Waver Amid Oil Price Hikes and Central Bank Meetings

Asian markets were volatile on Tuesday as investors weighed Middle East tensions and concerns over AI development. The region's shares struggled, with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.12%. South Korea's market led the decline, dipping by 0.25%, while Japan's Nikkei edged 0.19% higher after reversing early losses.

Oil prices rose due to ongoing supply concerns. U.S. crude increased 1.27% to $102.68 a barrel, and Brent was up 1.21% to $106.96 per barrel. Analysts at Mitsubishi UFJ Bank noted that markets are likely to focus on the risk of higher oil prices adding to inflationary pressures.

The Federal Reserve's two-day meeting began later in the day, with a 90% chance of a rate hike expected. The Fed has not increased interest rates since mid-2023. Morgan Stanley analysts predicted a 25 basis-point hike on Wednesday and in December, citing concerns over energy prices, strong demand tied to AI-related investment, and credibility.