South Korea's KOSPI Tumbles 3% as Iran Conflict Fuels Oil Rally to Multi-Week Peak

Asian markets declined sharply during Wednesday's session, driven by fresh US airstrikes on Iran that boosted oil prices and sparked a global bond selloff that extended into the region.

The MSCI Asia-Pacific Index, which excludes equities in Japan, dropped 1.5%. South Korea's KOSPI lost more than 3%, and Japan's Nikkei 225 fell 2.6%.

Oil Surges as Bond Yields Hit Multi-Year Records

Brent crude rose 1.3% to $95.91 a barrel on Wednesday. The increase followed a rally that started after the US launched new airstrikes on Iran on Tuesday, briefly pushing oil to a five-week high.

The attacks reignited concerns about potential disruptions to the Strait of Hormuz.

“The threat of further disruptions to the Strait of Hormuz has brought about renewed anxiety over inflation, driving a selloff in stocks across most major markets and a rout in global bond markets,” Westpac analysts wrote.

DBS analysts noted that if the bond rout does not stabilize, policymakers could be forced to take more aggressive steps to control yields.

The US 10-year Treasury yield hit an intraday high of 4.8122%, its highest level in nearly three years. Japan's five-year government bond yield rose to 2.295%, a record level.

Most Markets See Declines

Crypto assets also dropped alongside broader risk sentiment. Bitcoin fell to $77,000, while Ether slid to $2,410.73, according to the latest data.

Rising bond yields have been unsettling Asian tech and chip stocks for weeks. Wednesday's decline intensified that pressure, sparking a wider equity selloff.

Wall Street also fell overnight, with rising bond yields weighing on equities. The S&P 500 dipped 0.7%, and the Nasdaq Composite dropped 1%.

Traders now see a 67% chance that the Federal Reserve will raise rates at its two-day meeting ending September 16, up from 39.6% a week earlier, based on the CME Group's FedWatch tool, which gauges rate-hike odds from futures pricing.

With yields continuing to rise and a Fed decision two weeks away, markets face a turbulent period. Wednesday's selloff illustrates how directly the expanding Iran conflict is influencing oil, Wall Street, and Bitcoin.