Brent crude rallied towards $100 per barrel on Wednesday, keeping the mood in Asian stock markets subdued, as attacks intensified in the Middle East, stoking inflation worries ahead of the release of closely watched US consumer price data.
The yen strengthened towards the nearly seven-month high touched against the dollar on Tuesday as traders exited short positions in the Japanese currency amid expectations for faster Bank of Japan interest rate hikes and a potential rush of repatriation of Japanese capital.
The euro edged higher ahead of the European Central Bank's policy decision on Thursday, with markets widely expecting a hike amid inflationary pressures from the Iran war.
Iranian-backed Houthis in Yemen launched strikes on several Saudi cities on Tuesday, while US forces hit multiple Iranian oil tankers and Iran struck Jordan.
Oil prices jumped for a fourth straight session on Wednesday, with Brent crude futures rising $1.10 to $99.02 a barrel. US West Texas Intermediate crude was at $93.95 a barrel, up $0.93.
Japan's Nikkei slipped 0.2%, Hong Kong's Hang Seng dropped 0.3% and mainland Chinese blue chips were little changed.
A rebound in chip and AI stocks helped some other regional benchmarks though, with South Korea's KOSPI jumping 1.2% and Taiwan's TAIEX eking out a 0.2% gain.
Overnight, the Philadelphia SE semiconductor index jumped 1.3%, despite declines on Wall Street's three main indexes.
US S&P 500 futures added 0.1%, after the cash index sank 0.6% on Tuesday.
Pan-European STOXXX 50 futures fell 0.5%.
"Across several of the major macro markets, we see indecision in the price action -- tight ranges and a general holding/consolidation pattern," Chris Weston, head of research at Pepperstone, wrote in a client note.
Brent crude is currently "one of the clearest real-time signals for sentiment" for the overall market, and $100 "now feels like a highly achievable level," he said.
Inflation worries have weighed on global equities in recent weeks and lifted bond yields as traders price higher odds for central bank tightening.
US CPI data is due on Friday.
Traders assign close to even odds for a quarter-point hike or a hold from the US Federal Reserve on Wednesday of next week, while being all but certain of a quarter-point increase from the BOJ two days later.
The yen strengthened around 0.5% to 153.32 per dollar, edging back towards its high of 152.89 from the previous session. It had surged around 4% over the last five sessions, with hawkish comments from BOJ officials ostensibly initiating a move that then snowballed as breaks of key levels triggered additional buying, market players said.
The ECB is all but certain to raise euro zone rates by a quarter point on Thursday. The euro added 0.1% to $1.1634, putting it in the middle of its tight range of the past three weeks.
Sterling was little changed at $1.3552. The Bank of England is due to announce its latest policy decision on Thursday of next week, with economists predicting the key rate will be on hold for the remainder of this year.
The Aussie rose 0.2% to $0.7230. Bitcoin drifted higher to change hands at $79,009.09. Gold gained 0.7% to around $4,385 an ounce.
