Asian shares weaken as Hormuz uncertainty lifts oil prices

Asian stocks mostly fell on Tuesday while oil prices extended their gains as uncertainty over the reopening of the Strait of Hormuz weighed on markets and investors prepared for another possible US interest-rate increase. Hopes of an easing in Middle East tensions weakened after Donald Trump rejected Iran’s offer of a seven-day truce at the weekend. Trump said talks would resume this week, but the prospect did little to improve sentiment among traders concerned about prolonged supply disruptions.

Trump also denied an Axios report that he had offered Iran sanctions relief and access to frozen funds in exchange for steps related to its nuclear programme. Iran’s state broadcaster separately said Foreign Minister Abbas Araghchi would meet Qatari representatives over messages exchanged with the United States, including conditions for reopening Hormuz. The waterway is important to global oil and gas deliveries.

Market participants have also been watching disruption around the Bab al-Mandab Strait after Iran-backed Houthis seized Yemen’s Red Sea coast, according to the supplied report. BMO Capital Markets’ Ian Lyngen said markets should expect the conflict and supply disruptions to persist. West Texas Intermediate rose 0.7 per cent to $93.33 a barrel, while Brent gained 0.8 per cent to $106.16.

Average UK diesel prices reached a record high, the RAC said. The Nikkei 225 fell 0.6 per cent and Hong Kong’s Hang Seng dropped 0.5 per cent, while Shanghai rose 0.2 per cent. Investors were also awaiting US inflation and employment data.

Markets were pricing in a second consecutive rate increase at the end of October, as stronger employment could encourage the Federal Reserve to keep rates higher for longer. Shein shares fell almost 14 per cent in Hong Kong after disappointing earnings.