Asian Shares Waver as Oil Prices Surge Ahead of Fed and BOJ Meetings
Asian shares struggled on Tuesday as investors weighed Middle East tensions and calls for a slowdown in AI development, amidst elevated oil prices and higher bond yields.
The attacks by Yemen's Iran-aligned Houthis on Saudi Arabia have heightened supply concerns, with Brent crude rising 1.27% to $102.68 per barrel and WTI climbing 1.21% to $106.96 per barrel.
Markets are likely to remain focused on the risk that higher crude oil prices could add to inflationary pressures and push interest rates higher, said Yokoo Akihiko, analyst at Mitsubishi UFJ Bank.
The Federal Open Market Committee begins its two-day meeting later in the day, with markets pricing in a 90% chance of a rate hike. Analysts at Morgan Stanley expect a 25 basis-point hike on Wednesday and in December, citing second-round effects from energy prices and strong demand tied to AI-related investment.
The Bank of Japan is also widely expected to raise its interest rate by 25 basis points to 1.25% at the end of its two-day meeting on Friday, signaling more tightening ahead.