MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 2.3%, trimming this week’s gain to 0.7%

Asian shares sank on Friday as a near 40% rise in oil prices this ​month due to the intensifying war in the Gulf revived inflation fears, rattling bond markets and stoking rate hike expectations internationally.

Brent crude slid 0.4% to $100.3 a barrel, after soaring 7% overnight to a two-month high of $102. Attacks by ​Houthis on Saudi tankers in the Red Sea risk choking off a second crucial Middle East artery for world oil supplies, alongside Iran’s near-closure ​of the Strait of Hormuz.

Two of the world’s busiest shipping corridors are under threat in the same month, and ​markets are only just beginning to work out what that means, said Nigel Green, CEO of deVere Group, a financial advisory firm.

With that ceasefire now collapsed and ​oil back above $100, the drop which gave the Fed room to relax may already be reversing. This looks less like a short-lived spike and more like a genuine reopening of the inflation question, Green said.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 2.3%, trimming this week’s gain to 0.7%. Nikkei slipped 2.8%, also heading for a weekly rise of 0.7%.

KOSPI tumbled 4.8% and was set for a fifth consecutive week of declines with a 1% drop. Hang Seng index dropped 1.1%.

The ‌European Central ⁠Bank left rates unchanged overnight but a September rate hike is around 70% priced in.

Markets bet a one-in-three chance of ​a rate hike from the U.S. central bank as soon as next week, while a move in September is more than fully priced in.