Asian equities fell sharply on Friday as oil prices climbed nearly 40% this month, reviving inflation concerns and increasing expectations that central banks may need to maintain tighter monetary policy.

Brent crude traded near $100.30 per barrel after surging 7% overnight to a two-month high of $102. The risk of simultaneous disruptions in the Red Sea and the Strait of Hormuz has intensified concerns over global energy supplies.

Asian Markets Face Heavy Selling Pressure

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.3%. Across major markets:

• Japan’s Nikkei 225 dropped 2.8%

• South Korea’s KOSPI tumbled 4.8%

• Hong Kong’s Hang Seng declined 1.1%

Market sentiment weakened further after Alphabet and Tesla reported deteriorating cash flow due to heavy spending on AI infrastructure. Tesla shares fell around 14%, while Alphabet dropped about 7%.

Bond Yields Rise as Rate-Hike Expectations Return

The benchmark 10-year U.S. Treasury yield climbed to 4.7035%, its highest level in more than 18 months. The 30-year yield stood near 5.17%, close to a 19-year high.

Markets are now pricing in roughly a one-in-three chance that the Federal Reserve will raise interest rates as early as next week, while a September hike is more than fully priced in.

Higher yields supported the U.S. dollar, with the Dollar Index holding near 101.40. The Japanese yen remained close to a 40-year low at 163.82 per dollar.

Gold and Silver Also Come Under Pressure

Higher yields and a stronger dollar weighed on precious metals. Gold fell to around $4,027 per ounce, while silver slipped to $57.51 per ounce.

Conclusion

The sharp rise in oil prices is bringing inflation concerns back into focus, driving bond yields higher and strengthening expectations of tighter monetary policy.

Against this backdrop, equities, bonds and precious metals are all under pressure, while the U.S. dollar continues to benefit from safe-haven demand and higher yields.

Source: Reuters