MSCI’s Asia Pacific equities gauge dropped 1.7%, with decliners outnumbering gainers four to one

Asian stocks fell with bonds and gold as rising oil prices stoked inflation concerns and expectations for tighter monetary policy, fuelling a risk-off tone across markets.

MSCI’s Asia Pacific equities gauge dropped 1.7%, with decliners outnumbering gainers four to one. All 11 subgroups of the benchmark declined. Benchmark indices in Japan and South Korea both slipped at least 2.8%.

Nikkei 225 futures slipped 2.6%, Topix shed 2.2%, Australia’s S&P/ASX 200 declined 1.1%, Hong Kong’s Hang Seng slid 0.7% and the Shanghai Composite dipped 0.7%.

Brent climbed 2% to around US$96.50 a barrel as escalating US-Iran fighting heightened the risk of disruptions to oil flows through the Strait of Hormuz. The commodity has soared nearly 60% in 2026 so far.

Rising oil prices pressured bonds, pushing global yields to the highest since 2008.

Australian bonds extended losses, with yields on the 10-year note jumping as much as seven basis points to 5.25%, the highest level since July 2011.

New Zealand government debt also dropped, with traders pricing in a near-certain interest rate hike by the central bank later on Wednesday.

The renewed surge in energy prices is compounding inflation concerns already fuelled by government spending and heavy corporate borrowing to finance the artificial intelligence buildout.

Traders now put the odds of a rate hike in September at more than 50% for some central banks, as investors assess whether rising oil prices and bond yields will deepen pressure on stocks and other assets.

This morning session’s weak sentiment is clearly driven by the challenging combination of renewed Hormuz worries and rising global bond yields, said Homin Lee, a senior macro strategist at Lombard Odier Singapore.

We still think this is just part and parcel of a volatile boom phase, with higher beta markets exhibiting wilder swings, he said.

Lee said he is still maintaining a constructive view on Asia-Pacific markets, especially those in North Asia, as the underlying earnings picture is solid.

Gold, which becomes less attractive as interest rates rise, declined 0.5% to nearly US$4,330 an ounce after dropping around 6% over the previous three days. Bitcoin declined 0.6% to around US$77,000.