Markets across Asia posted gains Wednesday as crude oil prices stepped back from recent increases, with investors focusing attention on the Federal Reserve’s policy meeting to gauge how officials will navigate economic growth concerns and inflation pressures while Middle East conflicts continue.
Tensions escalated as Israel expanded military operations by eliminating Iran’s security chief, prompting Iran to launch fresh attacks on oil infrastructure in the United Arab Emirates. A high-ranking Iranian official indicated the nation’s new supreme leader has dismissed peace overtures from mediators, suggesting the conflict that has triggered worldwide oil market disruption will persist.
Crude oil markets saw some relief Wednesday despite the largely closed Strait of Hormuz. Brent crude futures declined 1% to $102.28 per barrel, with U.S. West Texas Intermediate crude dropping 1.6%.
This provided encouragement to stock investors, as MSCI’s comprehensive Asia-Pacific index excluding Japan climbed 1.2%. Japan’s Nikkei surged 2%.
Chinese blue-chip stocks edged higher by 0.1% while Hong Kong’s Hang Seng index advanced 0.3%.
JPMorgan’s head of global commodities research, Natasha Kaneva, explained that the current stability in Brent and WTI pricing comes from temporary factors including regional inventory surpluses, benchmark structure, and policy measures.
“If the Strait does not reopen…Brent and WTI will ultimately reprice higher as Atlantic basin inventories are drawn down and the global market is forced to clear at a materially tighter supply level,” she stated.
The UAE is considering participation in a U.S.-coordinated mission to safeguard shipping through the Strait of Hormuz, though multiple Western nations have declined President Trump’s requests to deploy naval vessels for tanker escorts in the area.
S&P 500 and Nasdaq futures both gained 0.2% following overnight Wall Street advances, buoyed by anticipation of robust earnings from semiconductor company Micron Technology. Market participants will monitor the company’s Wednesday results for insights on chip supply constraints and pricing trends.
Following the Reserve Bank of Australia’s rate increase that launched a packed week for central banks globally, attention now shifts to the Fed’s policy announcement. Investors will scrutinize updated economic projections, particularly the “dot plot” forecasting tool, which may no longer indicate any rate reductions this year.
While the Fed is anticipated to maintain current policy settings, discussions will center on whether the Iran situation primarily threatens economic expansion, increases inflation persistence, or creates a challenging combination of slower growth and rising prices.
Fed Chair Jerome Powell, scheduled to conclude his tenure in May, will conduct a news conference where markets will listen for clues about his potential continuation as a board governor after his chairmanship expires.
“Consensus still points to the median dot plot showing one 25-basis-point cut for 2026, aligning with current market pricing,” noted IG analyst Tony Sycamore.
“That said, there’s a decent chance the dots could shift more hawkish, perhaps even to zero cuts, if the committee views the oil shock as leading to stickier inflation.”
The Bank of Canada also convenes Wednesday with no policy adjustments expected. Markets anticipate the next move will be upward, with one rate increase fully anticipated by year-end.
In foreign exchange trading, the U.S. dollar weakened with the euro maintaining $1.1539 after gaining 0.3% overnight.
The Japanese yen stabilized at 159 per dollar, extending two consecutive days of gains to distance itself from the 160 threshold that has previously prompted official intervention.
Treasury bonds recovered modestly overnight, supported by successful 20-year bond auction results. Ten-year Treasury note yields remained unchanged at 4.2024% after declining 2 basis points overnight.
