Asian markets fluctuate as Trump's Hormuz shipping fee plan lifts oil, rattles investors

SINGAPORE: Asian stock markets traded unevenly on Tuesday as investors reacted to President Donald Trump's announcement that the United States would reinstate its blockade of Iranian shipping and impose a 20% fee on cargo passing through the Strait of Hormuz, pushing oil prices to a one-month high.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4% in early trade, supported by a 2.2% gain in South Korean stocks. Japan's Nikkei 225 edged up 0.2%, while S&P 500 e-mini futures slipped 0.1%.

Brent crude futures climbed 2.6% to $85.50 per barrel, their highest level since mid-June, as concerns over disruptions to global energy supplies intensified.

Investor sentiment was also weighed down by comments from Federal Reserve Governor Christopher Waller, who said the US central bank may need to raise interest rates in the near term if inflation remains well above its 2% target.

The remarks increased expectations of a rate hike at the Federal Reserve's July 28-29 meeting. According to CME Group's FedWatch tool, markets are pricing in a 43.3% probability of a 25-basis-point increase, up from 34.2% on Friday.

"The prospect of tighter monetary policy into a potential energy shock is rarely supportive for risk assets," said Chris Weston, head of research at Pepperstone Group Ltd.

On Wall Street, stocks closed lower overnight as renewed tensions between the United States and Iran drove oil prices higher. The Dow Jones Industrial Average fell about 0.25%, the S&P 500 lost 0.8%, and the Nasdaq Composite dropped 1.6%.

Markets are now awaiting US consumer price index (CPI) data due later on Tuesday, along with Federal Reserve Chair Warsh's semi-annual monetary policy testimony before Congress.

In Seoul, trading remained volatile, with SK Hynix shares swinging sharply after falling as much as 4.7% before rebounding to gain as much as 4.6%. The chipmaker has experienced heightened volatility since its Nasdaq debut last week.

In currency markets, the US dollar index held near a monthly high at 101.29. The yield on the benchmark 10-year US Treasury note rose 2.2 basis points to 4.6297%. Spot gold eased 0.1% to $3,997.27 per ounce, while bitcoin gained 0.3% to $62,318.43 and ether rose 0.7% to $1,777.63.