Asian Shares Plummet as Oil Prices Soar Amid Geopolitical Tensions

Asian share markets declined on Monday due to rising oil prices and concerns over potential interest rate hikes in the US and Japan. Oil prices surged after new attacks in the Gulf and supply disruptions in Saudi Arabia and the Strait of Hormuz, causing Brent crude to climb more than 3%.

The Federal Reserve is expected to raise rates by 25 basis points next week, with an 86% chance priced into markets. This would be the first hike since mid-2023. The Bank of Japan is also anticipated to lift its cash rate by a quarter point to 1.25% when it meets on Friday.

Rising bond yields have dented equity valuations, but analysts suggest that strong corporate earnings may provide support for US stocks despite higher borrowing costs. Ben Snider, chief U.S. equity strategist at Goldman Sachs, noted that equities typically struggle when the Fed starts to hike rates, but the S&P 500 has generated an average three-month return of -2% at the start of seven hiking cycles during the last few decades.

The dollar held steady against the yen and euro, while sterling remained flat ahead of the Bank of England's rate decision. Gold prices slipped 0.3% to $4,336 an ounce as higher bond yields diminished its appeal.