Asia Markets Waver as Yen Surges and Iran Tensions Push Oil Higher

Asian stock markets struggled for direction on Tuesday as the Japanese yen surged to its strongest level in months and rising tensions involving Iran pushed oil prices higher.

Japan’s Nikkei 225 moved between gains and losses before edging up 0.2%, while the yen strengthened as much as 0.6% against the US dollar, reaching its strongest level since February. The currency’s sharp rise reflected growing expectations that the Bank of Japan could move more quickly towards further monetary tightening.

Elsewhere in the region, markets delivered a mixed performance. MSCI’s broad index of Asia-Pacific shares outside Japan rose slightly, supported by gains in South Korea’s KOSPI. However, Australian shares fell after consumer sentiment weakened sharply in September.

Oil prices continued their upward movement for a third consecutive day, with Brent crude trading above $97 a barrel. Concerns over possible further conflict in the Persian Gulf added pressure to energy markets after Iran warned of retaliation against any new attacks, including potential action targeting energy infrastructure across the region.

The rise in oil prices also weighed on broader investor confidence, as markets faced uncertainty over geopolitical developments and mixed economic signals from across Asia.

Japan’s latest economic data presented a complicated picture. The country’s economy grew faster than initially estimated during the April-to-June quarter, supported by business spending, although the expansion remained below analysts’ expectations. At the same time, Japanese real wages recorded their strongest annual increase since 2021, strengthening the argument for the Bank of Japan to continue tightening monetary policy.

Meanwhile, the US dollar remained near a two-week low against a basket of major currencies, while US Treasury yields edged higher as investors continued to assess expectations for the Federal Reserve’s next policy meeting.

Gold prices also moved higher, while major cryptocurrencies including bitcoin and ether recorded modest gains.

With geopolitical tensions, rising energy prices and mixed economic data continuing to shape investor sentiment, Asian markets are likely to remain cautious as traders watch for further developments in the days ahead.