Asian stocks fell on Thursday, with Japan’s benchmark leading losses after the Bank of Japan kept interest rates unchanged and flagged rising uncertainty over inflation as surging oil prices and escalating Middle East conflict clouded the outlook.
Regional equities weakened after Wall Street declined overnight following a hawkish message from the Federal Reserve.
Wall Street futures were largely unchanged during Asian hours.
BOJ holds rates steady, warns of inflation risks
The Bank of Japan held its short-term policy rate at 0.75%, as widely expected, choosing to pause tightening while officials assessed risks from imported inflation and external shocks.
Policymakers said the future course of the Middle East conflict and crude oil prices could affect Japan’s inflation path, especially given the country’s heavy reliance on energy imports.
Board member Hajime Takata dissented from the decision, calling for a 25 basis-point hike, underscoring growing concern within the board that persistent price pressures may require a firmer response.
Japan’s Nikkei 225 dropped 2.6%, while the broader TOPIX index slid 2%.
Asian stocks pressured by oil surge, Fed's hawkish hold
South Korea's KOSPI fell 1.3%, while Singapore's Straits Times Index edged down 0.5%.
China's Shanghai Composite and Shanghai Shenzhen CSI 300 slipped 1% each, while Hong Kong's Hang Seng index dropped 1.5%.
Oil prices remained a major driver of sentiment after Brent crude surged above $110 a barrel on Wednesday and extended gains in Asian trade on Thursday.
The latest jump followed Iranian attacks on several energy facilities across the Middle East after a strike on Iran’s South Pars gas field.
Qatar said Iranian missiles caused extensive damage to the Ras Laffan energy hub, while Saudi Arabia intercepted ballistic missiles and drone attacks targeting energy infrastructure.
The widening conflict has heightened fears of prolonged supply disruption through the Strait of Hormuz, a route handling roughly a fifth of global oil and liquefied natural gas flows.
Global sentiment was also affected by the Federal Reserve's rate hold decision with a hawkish tilt on Wednesday.
Elsewhere, Australia's S&P/ASX 200 fell 1.5% after data showed that the country's unemployment rate rose in February as full-time jobs declined.
Futures tied to India's Nifty 50 rose 0.4%.
Source: Investing