TOKYO — Asian stock markets declined Tuesday while crude oil costs surged as diplomatic attempts to resolve the Iran conflict appeared to hit another roadblock.
Although a fragile ceasefire remains in place, the Strait of Hormuz continues to be effectively blocked. Many Asian nations, particularly resource-dependent Japan, depend on this shipping lane for their petroleum imports.
Japan’s primary Nikkei 225 index dropped 1.1% to 59,884.12 following the central bank’s decision to maintain its benchmark interest rate at 0.75%.
The Bank of Japan indicated that although the nation’s economy continues to expand at a moderate pace, growth is anticipated to decelerate as the conflict drives up costs for petroleum and other commodities. The monetary policy board’s decision was split 6-3, showing division among members. Mounting pressure exists for Japan to incrementally increase interest rates after maintaining them at or below zero for years to fight deflation.
“There are various risks to the outlook,” the bank stated. “For the time being it is necessary to pay particular attention to the impact of the future course of the situation in the Middle East.”
Other Asian markets showed mixed results, with South Korea’s Kospi climbing 1% to 6,683.10.
Hong Kong’s Hang Seng index fell 0.7% to 25,751.04, while Shanghai’s Composite index declined 0.2% to 4,078.77.
Australia’s S&P/ASX 200 dropped 0.6% to 8,717.80.
June delivery Brent crude oil increased $1.11 to $109.34 per barrel. July Brent contracts, where most current trading activity occurs, gained $1.08 to $102.77 per barrel.
Brent crude was trading around $70 per barrel before the conflict began and has temporarily spiked near $120. U.S. benchmark crude rose 96 cents to $97.33 per barrel.
The Federal Reserve, European Central Bank, and Bank of England are all scheduled to announce interest rate decisions this week.
Monday saw the S&P 500 edge up 0.1% to a new record high of 7,137.91, marking a slowdown after weeks of substantial gains fueled by robust corporate earnings and optimism that the economy might sidestep severe consequences despite the ongoing conflict.
The Dow Jones Industrial Average slipped 0.1% to 49,167.79, while the Nasdaq composite gained 0.2%.
Market watchers are anticipating earnings announcements from major technology companies including Alphabet, Amazon, Meta Platforms, Microsoft and Apple.
Bond market activity showed Treasury yields rising alongside oil prices. The 10-year Treasury note yield increased to 4.33% from Friday’s close of 4.31%.
Currency markets early Tuesday showed the dollar declining slightly to 159.04 Japanese yen from 159.42 yen. The euro traded at $1.1716, down from $1.1720.
