Brent crude extended gains in early Asian trading to over US$91 a barrel after renewed fighting in the Middle East

Asian stocks edged lower as renewed geopolitical tensions pushed oil prices higher, reviving inflation concerns and expectations for further monetary tightening.

The MSCI Asia Pacific Index slid 0.2 per cent, with equity benchmarks in South Korea and Japan declining.

Hang Seng futures dropped 0.4 per cent, Topix declined 0.3 per cent and S&P/ASX 200 slipped 0.4 per cent.

Elsewhere, Brent crude extended gains in early Asian trading to over US$91 a barrel after renewed fighting in the Middle East.

Iran and US exchanged strikes for the first time in about a month as US attacked Iran and the latter responded by launching attacks on the United Arab Emirates and Jordan.

The flare-up in Middle East tensions dimmed prospects for a normalisation of shipping through Hormuz, keeping oil prices higher and adding to inflation concerns.

With traders tracking geopolitical volatility as well as potential seasonal volatility, it will be interesting to see which market impulse from last week might carry over to this week, said Chris Larkin at E*Trade from Morgan Stanley.

Unexpectedly strong labour market data might be taken as bad news by the market, since it could reinforce expectations for a rate hike, he said.

Traders will be closely monitoring the yen as the currency traded just below 160 versus the US dollar, raising the risk that authorities may enter the market again to slow its decline.

While the currency firmed slightly on Monday, the yen has still unwound more than half the gains it made during a record bout of intervention that began in late July.

Meanwhile, won is seen extending its rally as the nation’s chip firms bring in capital from overseas to expand their production, according to BNP Paribas.