Shares skid in Asia as oil rises, rate hikes loom

SYDNEY: Share markets slid in Asia on Monday (Sep 14) as supply concerns caused oil prices to spike anew, while investors braced for possible interest rate hikes in both the United States and Japan this week.

Brent climbed 3 per cent as new strikes on Saudi Arabia and on ships in the Gulf tested nerves, after an attack on a Saudi oil pipeline and an advance by Yemen’s Houthis threatened to worsen the wartime disruption to global energy supplies.

A meeting in Oman between Iran and Gulf Arab states, scheduled for Monday to discuss a deal on opening the Strait of Hormuz, was postponed.

With shipping through the strait and the Bab el-Mandeb under threat, analysts fear oil prices could stay elevated for a lengthy period, stoking inflation globally.

An uncomfortably hot US consumer price report on Friday led markets to price in an 86 per cent chance the Federal Reserve will lift rates by 25 basis points on Wednesday, and move again by December. It would be the first hike since mid-2023.

“We now expect the Fed to hike twice this year, in September and December,” said Michael Feroli, chief US economist at JPMorgan. “At this stage, failing to back up words with action could put the credibility of the institution at risk.”

“Whether these actions represent a limited recalibration or mark the start of a more sustained hiking cycle will depend on incoming data,” he added. “We anticipate the former scenario but see risks for the latter.”

Brent futures were last up 2.6 per cent at US$107.36 a barrel, having gained almost 9 per cent last week, while US crude rose 2.4 per cent to US$102.48 a barrel.

Japan’s Nikkei fell 1.7 per cent, while South Korea dropped 3.3 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.8 per cent.

In Europe, EUROSTOXX 50 futures lost 0.5 per cent, while DAX futures fell 0.4 per cent and FTSE futures dipped 0.1 per cent. On Wall Street, S&P 500 futures lost 0.5 per cent, while Nasdaq futures fell 1.1 per cent.